** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**Washington,D.C. 20549

**Form 10-Q**

(Mark One)

x   QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

For the quarterlyperiod ended November 30, 2002

OR

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For thetransition period from ________ to ___________

Commissionfile 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 markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes  x  No ____

Indicate by check mark whether the registrant is an accelerated filer (asdefined in Rule 12b-2 of the Exchange Act).  Yes ____   No x

As of January 4, 2003 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 |

 

 

 

 

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Table of Contents

**ANDERSENGROUP, INC.FORM 10-Q**

**Table of Contents**

 

Page No.

**Part I.      Financial  Information**

 

Item 1:    Financial  Statements:

 

                 Consolidated  Condensed Balance Sheets as of November 30, 2002 and February 28, 2002

3

                 Consolidated  Condensed Statements of Operations for the Three and Nine Months Ended November 30, 2002  and 2001

4

                 Consolidated  Condensed Statements of Cash Flows for the Nine Months Ended November 30, 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

12

 

 

Item 4:     Controls and Procedures

13

 

 

**Part II.  Other  Information**

 

 

 

Item 6:  Exhibits  and Reports on Form 8-K

13

 

 

Signatures

14
 

 

 

 

 

 

 

 

 

 

 

 

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Table of Contents

**Part I. Financial InformationItem 1.  Financial Statements**
**ANDERSEN GROUP, INC.Consolidated Condensed Balance Sheets(In thousands)(unaudited)**
 

November  30, 2002

February 28, 2002

**ASSETS**

 

 

*Current assets:*

 

     

   Cash and cash equivalents

$         7,162

$         1,152

   Marketable  securities

1,333

455

   Accounts  and other receivables less allowances of $14 and $96, respectively

40
3,820
   Inventories

-

23

   Prepaid  expenses and other assets

33

648

   Net assets  held for sale

           -

   6,974
   
     Total  current assets

 8,568

 13,072

Property, plant and equipment, net

3,461

3,632

Prepaid pension expense

4,475

4,775

Investment in  Moscow Broadband Communication Ltd.

2,171

2,683

Other assets

    1,037

       913
   
 

$       19,712

$       25,075
   
**LIABILITIES AND STOCKHOLDERS' EQUITY**

 

 

*Current liabilities:*

 

 

   Current maturities of long-term debt

$           420

$           435

   Short-term borrowings

-

2,366

   Accounts  payable

401

1,041

   Other  current liabilities

941

1,712

   Deferred income  taxes

           26

       156
   
     Total  current liabilities

1,788

5,710

 

 

 

Long-term debt, less current maturities

1,674

2,158

Other liabilities

874

1,842

Deferred income taxes

   1,697

    1,614
   
     Total  liabilities

   6,033

  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

    3,508

    3,659
   
     Total stockholders'  equity

  13,679

  13,751
   
 

$       19,712

$       25,075
    The accompanying notesare an integral part of these consolidated condensed financial statements.
 

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**ANDERSEN GROUP, INC.Consolidated Condensed Statements of Operations(In thousands, except per share data)(unaudited)**

 

Three months ended

Nine months ended

 

November 30, 2002

November 30, 2001

November 30, 2002

November 30, 2001

Revenues

 

 

 

 

 Investment  and other income

$           322    

$             76 

$           608 

$           467 

 

Costs and expenses:

 

 

 

 

   General and  administrative

693 

439 

1,989 

1,300 

   Loss on  sale of asset

- 

197 

- 

197 

   Interest  expense

      65 

      94 

      201 

       300 

 

 

    758 

    730 

   2,190 

    1,797 
   
Loss from continuing operations   before equity in losses of  unconsolidated   subsidiary and income taxes 

 

(436)

 

(654)

 

(1,582)

 

      (1,330)
               
Equity in losses of Moscow   Broadband Communication Ltd.

                                 (172)

                            (183)

                            (512)

                                     (594)
   
Net loss from continuing operations before   income taxes

                                (608)

  (837)

                           (2,094)

    (1,924)

Income tax benefit 

  (135)

  (275)

    (551)

    (505)

 

Net loss from continuing operations

(473)

        (562)

(1,543)

    (1,419)

Discontinued operations (Note 2):  Income from discontinued segment,    net of income taxes of $0; ($173);    $80 and $608, respectively

  - 

  283 

  132 

  945 

  Gain on sale  of discontinued segment, net      of income taxes of $686

                                     - 

         - 

    1,472 

          -  

 

Net (loss) income

(473)

(279)

61 

    (474)

Preferred dividends

     (71)

     (70)

    (212)

    (216)

 

(Loss) income applicable to common shares

 $         (544)

$         (349)

 $         (151)

$         (690)

 

(Loss) earnings per common share:  Basic and diluted:

 

 

 

 

Net loss from continuing operations

$        (0.26)

$        (0.30)

$         (0.83)

$        (0.79)

Income from discontinued operations

-  

0.13 

0.06 

0.46 

Gain on sale of discontinued operations

        -  

          - 

     0.70 

          - 

 

 

$        (0.26)

$        (0.17)

$       (0.07) 

$        (0.33)

 

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

 

 

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**ANDERSENGROUP, INC.Consolidated Condensed Statements of Cash Flows(In thousands)(unaudited)**

 

Nine Months ended

 

November 30, 2002

November 30, 2001

 

   

***Cash flows from operating  activities:***

 

 

Net income ( loss)

$            61 

$       ( 474)

 
      
*Adjustments to reconcile net loss to net cash*

 

 

*provided by (used in) operating activities:*

 

 

     Accrued  loss on asset held for sale

- 

197 

     Equity in losses of Moscow Broadband  Communication Ltd.

512 

594 

     Gain on  sale of JM Ney's operating assets

(1,472)

- 

     Gain on  settlement of retiree healthcare liability

(142)

- 

      Depreciation, amortization and accretion

235 

1,238 

     Deferred  income taxes

(75)

96 

     Pension (income)  expense 

(149)

44 

     Net  losses (gains) from marketable securities and  investments

                            (319)

2 

     Purchases  of marketable securities

(700)

(77)

     Proceeds  from sales of marketable securities

141 

19 

 

 

 

*      Changes in operating assets and liabilities net of charges        from sale of JM Ney's net  assets:*

 

 

     Accounts  and other receivables

3,780 

2,156 

      Inventories

(419)

4,656 

     Prepaid  expenses and other assets

639 

319 

     Accounts  payable

(640)

(324)

     Accrued  expenses and other long-term obligations

 (1,448)

     (399)

 

     Net cash  provided by operating activities

          4  

    8,047 

 

***Cash flows from investing  activities:***

 

 

     Purchases  of property and equipment, net

        (9)

     (184)

     Proceeds  from sale of JM Ney, net of escrow

10,390 

- 

     Transaction expenses paid

 (1,172)

          - 

 

     Net cash used in investing activities

   9,209 

    (184)

 

***Cash flows from financing activities:***

 

 

     Principal payments on long-term debt 

(499)

(6,729)

     Repayment of short-term debt, net

(2,366)

(1,500)

     Purchase  of subsidiary warrants

(160)

- 

     Stock  options exercised

34 

6 

     Preferred  dividends paid 

    (212)

   (222)

 

     Net cash  used in financing activities

(3,203)

(8,445)

 

     Net  decrease in cash and cash equivalents

6,010 

(582)

 
      
     Cash and  cash equivalents - beginning of period

   1,152 

 1,217  

 

     Cash and  cash equivalents - end of period

$        7,162 

$          635  
   
 The accompanying  notes are an integral part of these consolidated financial statements.

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**ANDERSEN GROUP, INC.Notes to Consolidated Condensed Financial Statements(unaudited)**

(1)           AccountingPolicies

The accompanying unaudited interim condensed financial statements andrelated notes should be read in conjunction with the audited ConsolidatedFinancial Statements of Andersen Group, Inc. (the"Company") and related notes as contained in the Annual Report onForm 10-K for the fiscal year ended February 28, 2002.  The interim condensed financial statementsinclude all adjustments (consisting only of normal recurring adjustments) andaccruals necessary in the judgment of management for a fair presentation ofsuch statements.  In addition, certainreclassifications of the consolidated balance sheet as of February 28, 2002 andthe consolidated statement of operations for the three and nine months ended November30, 2001 to reflect The J.M. Ney Company ("JM Ney") as a discontinuedoperation under Statement of Financial Accounting Standards No. 144 due to thesale of its operating assets effective March 22, 2002, have been made so thatit conforms to the current period presentation.(2)           DiscontinuedOperations - Sale of Assets of JM NeyEffective March 22, 2002, the Company sold the operating assets of JMNey to Deringer Mfg. Company ("Deringer") for which it receivedapproximately $10,990,000, of which $600,000 was placed in an escrow account tosatisfy potential claims relating to inventory and representations made by theCompany to Deringer.  The Company hasrecorded a gain of $1,472,000 from this sale, after estimated income taxes of$686,000. The following summarizes the elements of the transaction (inthousands):

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 nine month periods ended November 30, 2002 and 2001,JM Ney's summarized results of operations were as follows (in thousands):

 

Three Months  Ended November 30,
   
Nine Months  Ended November 30,

 

2002

2001
   
2002

2001

Net sales and other revenues

$                -

$        6,233 

 

$         1,298 

$      21,739 

Cost of sales

-

(4,466)

 

(744)

(15,797)

Operating expenses

      -

 (1,192)

 

  (333)

  (3,718)
      
Operating income

-

575 

 

221 

2,224 

Interest expense

      -

    (119)

 

      (9)

     (624)
      
Net income before income taxes

-

456 

 

212 

1,600 

Income tax expense

      -

    (173)

 

     (80)

     (608)
      
Net income before cumulative effect accounting  adjustment

                           -

                            283 

 

                             132 

                         992 

Cumulative effect accounting adjustment, net of  income taxes

                           -

                                -  

 

                                -   

                       (47)

 

 

 
Net income  

$                - 

$           283  

 

$           132  

$           945 

 
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Table of Contents

The February 28, 2002 consolidated balance sheet has been reclassifiedto reflect the net assets of JM Ney which were held for sale, as follows (inthousands):

 

 

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 
   
In connection with the asset sale, theCompany entered into an eight-year lease with Deringer for the lease of JM Ney'smanufacturing facility.  The lease calls for the Company to receive monthlyrental payments at the annual rate of $290,000 with annual increases of theannual lease rate of $5,800.

 (3)           Investment inMoscow Broadband Communication Ltd.The Company records its investment in Moscow Broadband CommunicationLtd. ("Moscow Broadband") using the equity method of accounting.  Moscow Broadband has a December 31 year endand, as a result, the Company's equity in Moscow Broadband's results isreported on a two month lag.  For thenine months ended November 30, 2002 and 2001, the Company recorded losses of $506,000and $591,000, respectively, which represent its 25% interest in MoscowBroadband's losses of $2,025,000 and $2,376,000 for the nine months ended September30, 2002 and 2001, respectively.  Theselosses include Moscow Broadband's recording of a 50% equity interest in thelosses of ZAO ComCor-TV ("ComCor-TV"), a Russian company whichdelivers cable television, high speed data transmission and Internet servicesto its subscribers, for the same periods.

 In May 2002, Moscow Broadband contributed $5,000,000 to ComCor-TV'sequity capital.  In July 2002, MoscowTelecommunications Company ("COMCOR") contributed operating equipmentand shares of The Institute for Automated Systems ("IAS") with anaggregate agreed upon value of $17,374,000. Such contributions were made in accordance with the provision ofagreements, which if approved by the Company's stockholders and consummated,will result in the Company acquiring a 100% interest in ComCor-TV.  Until such transaction is closed, MoscowBroadband and COMCOR share voting control over ComCor-TV in accordance withagreements among the parties. Accordingly,Moscow Broadband continues to record a 50% equity interest in ComCor-TV'sresults of operations.

At November 30, 2002, the carrying value of the Company's investment in MoscowBroadband was $2,171,000, and the Company's 25% equity interest in the netassets of Moscow Broadband was $2,552,000. The $381,000 difference is attributed to a non-depreciable asset thatwas contributed to ComCor-TV and will not result in the Company accreting thedifference into its consolidated results of operations.

The following presents summarized financial information for Moscow Broadband asof September 30, 2002 and December 31, 2001 and its results of operations forthe three and nine month periods ended September 30, 2002 and 2001 (inthousands):

 
 September 30, 2002

December 31, 2001

Balance Sheet Data:

 

 

     Current  assets

$         1,081

$         4,353

      Noncurrent assets

    9,174

    8,040

 

     Total  assets

$       10,255

$       12,393

 

     Accounts  payable and accrued liabilities

$              46

$            137

      Stockholders' equity

  10,209

  12,256

 

     Total  liabilities and stockholders' equity

$       10,255

$       12,393

  

 

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Table of Contents

 

Three Months Ended  September 30, 

Nine Months  Ended September 30,

 

2002

2001

2002

2001

Statement of Operations Data:

 

 

 

 

     Net loss  before equity in losses of ComCor-TV

$           (60)

$         (196)

$         (340)

$         (584)

     Equity in  losses of ComCor-TV

(627)

(535)

(1,707)

(1,792)

 

     Net loss

$         (687)

$         (731)

$      (2,047)

$      (2,376)

 

 The following presents summarized financial information for ComCor-TVas of September 30, 2002 and December 31, 2001 and for the three and nine monthperiods ended September 30, 2002 and 2001 (in thousands): 

 

September 30, 2002

December 31, 2001

Balance Sheet Data:

 

 

                Current assets

$         6,759

$         2,930

                Non-current  assets

  28,099

  14,850

 

                Total  assets

$       34,859

$       17,780

 

                Current  liabilities

$         1,939

$         3,631

                Non-current  liabilities and minority interest

  1,932

  2,124

                Stockholder's  equity

  30,988

  12,025

 

               Total liabilities and stockholders' equity

$       34,859

$       17,780
   
 

 

Three Months  Ended September 30,

Nine Months  Ended September 30,

 

2002

2001

2002

2001

Statement of Operations Data:

 

 

 

 

  Revenues

$     443 

$     289 

$    1,308 

$     774 

  Cost of  revenues, including amortization of intangibles

$   (882)

$   (685)

$  (2,535)

$(2,198)

   Loss from  operations

$(1,262)

$(1,161)

$  (3,486)

$(3,906)

  Net loss

$(1,252)

$(1,071)

$  (3,412)

$(3,584)

 (4)           ComCor-TV andMoscow Broadband Transactions 

In April 2002, as amended in September 2002, theCompany entered into agreements, subject to shareholder and regulatoryapprovals, pursuant to which the Company will acquire the 50% equity ownershipof ComCor-TV owned by COMCOR in exchange for 4,000,000 shares of the Company'scommon stock.  Theagreements require COMCOR to contribute defined operating assets and additionalshares of  IAS to ComCor-TV.  Such contributions were made in July2002.  In order to complete thistransaction, the Company is required to acquire substantially all of theoutstanding shares of Moscow Broadband that it currently does not own and tocontribute Moscow Broadband's remaining shares of IAS and approximately $16.7million of cash to ComCor-TV, of which $5 million was contributed by MoscowBroadband in May 2002. ComCor-TV is currently dependentupon outside sources of capital.  Without the capital to be provided byCOMCOR, Moscow Broadband and the Company pursuant to the acquisition agreements,ComCor-TV may not be able to continue as a going concern, which could otherwisehave a significant adverse affect on the reported value of the Company'sinvestment in Moscow Broadband.  As further discussed in Note 11, theCompany's board of directors has recommended that the Company close on theseproposed transactions only if prior to closing the Company or Moscow Broadbandshall have received commitments of $4 million or more of new capital.

 

 

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The agreements entered into in April 2002, as amended, pursuantto which the Company plans to increase its ownership of ComCor-TV require theCompany and Moscow Broadband to make cash capital contributions to ComCor-TVtotaling approximately $16.7 million, of which approximately $5 million waspaid by Moscow Broadband in May 2002. In order to meet these paymentobligations, the Company expects to raise funds by (i) obtaining a loan collateralizedby 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 tothe limitations contained in the acquisition agreements. The Company may alsoarrange for ComCor-TV or Moscow Broadband to raise funds through the issuanceof equity securities, which, if successful, could result in the dilution of theCompany's ownership of ComCor-TV. However, depending on market conditions, such sources of cash may stillbe inadequate to meet the scheduled payments into ComCor-TV and still providethe Company with sufficient liquidity to meet its administrative expenses anddebt service obligations.

(5)           Prepaid Pension Expenseand Other liabilities

As a result of the sale of JM Ney's assets as discussed in Note 2, and theresultant 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 ofapproximately $1,431,000 due to the reduction in the expected future pensionbenefits for plan participants has been recorded as an offset againstpreviously unrecognized actuarial losses of the plan and, as a result, has notdirectly impacted the reported gain on sale.

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

(6)           Income Taxes

Income tax expense represents an estimate of the effective income tax rate forthe current fiscal year after considering valuation allowances with respect tothe Company's ability to realize a tax benefit from its equity in the losses ofMoscow Broadband.

(7)           Earnings  (Loss) Per Share

Earnings (loss) per share are computed based on the weighted average number ofshares of common stock and common stock equivalents outstanding.  Diluted earnings per share assumes fullconversion of all convertible securities into common stock at the later of thebeginning of the year or date of issuance, unless antidilutive.   For the three and nine month periods ended November30, 2002 and 2001 the effect of the assumed conversion of the Company'sdilutive securities had an antidilutive effect on the Company's per shareresults from continuing operations.

(8)           Business Segments andExport Sales

  As discussed in Note 2,effective March 22, 2002, the Company sold the operating assets of JM Ney toDeringer.  The operations of JM Ney hadcomprised the Company's electronics segment. As a result of the sale of these assets, the Company currently operatesin one segment comprised of corporate, administrative and investmentactivities.

(9)           Litigation

The Company is involved in various legal proceedings generally incidental toits business.  The outcome of anylitigation or regulatory issues contains an element of uncertainty.  Given the legal and factual issues thatremain outstanding related to the Company's litigation, the Company currentlyhas no basis to ascertain the range of loss, should any occur, with respect toan outcome that may be considered unfavorable.

(10)         Supplemental Disclosure ofCash Flow Information

 In the prior fiscal year,during the nine months ended November 30, 2001, the Company issued 11,323shares of its common stock from the  conversion of 5,825shares of its cumulative convertible preferred stock.

 

 

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

OverviewFrom February 1991 through March 22, 2002, the Company owned JM Ney as itsprimary operating subsidiary.  Theoperating assets of JM Ney were sold effective March 22, 2002, and since thatdate the Company has substantially liquidated JM Ney's net current assets thatwere 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% interest in ComCor-TV, a Russian company which delivers cabletelevision, high-speed data transmission and Internet services to itssubscribers.  ComCor-TV is a start-upventure which is currently expanding its network and increasing its customer baseto those homes and businesses to which it presently has access.

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

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

Critical Accounting Policies and EstimatesThe MD&A discusses the Company's consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States.  Thepreparation of these financial statements requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities andthe disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses duringthe reporting period.  On an on-goingbasis, management evaluates its estimates and judgments, including thoserelated to product returns, bad debts, inventories, investments, income taxes,financing operations, retirement benefits, and contingencies andlitigation.  Management bases itsestimates and judgments on historical experience and on various other factorsthat are believed to be reasonable under the circumstances, the results ofwhich form the basis for making judgments about the carrying values of assetsand liabilities that are not readily apparent from other sources.  Actual results may differ from theseestimates 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 ofits consolidated financial statements:  

Discontinued OperationsUnder terms of the sale of JM Ney's operating assets, the Company remainsexposed to losses from its inability to collect accounts receivable balancesand from claims against the portion of the proceeds which are being held inescrow pending the satisfactory resolution of potential claims relating tocertain inventories and representations made by the Company to Deringer.  The Company believes its reserves areadequate to meet these contingencies, but there can be no assurances untilthese matters have been fully resolved.

Deferred Tax AssetsThe Company records a valuation allowance to reduce its deferred tax assetsto the amount that it believes is more likely than not to be realized. TheCompany considers future taxable income and ongoing prudent and feasible taxplanning strategies in assessing the need for the valuation allowance.  When the Company determines that it may notbe able to realize all or part of its net deferred tax assets, a valuationallowance to reduce the deferred tax assets to estimated recoverable amounts ischarged to income in the period such determination is made.  Likewise, should the Company determine thatit would be able to realize its deferred tax assets in the future in excess ofits net recorded amount, a reduction in the valuation allowance would increaseincome in the period such determination is made. 

Investment in Moscow BroadbandThe Company records its investment in Moscow Broadband using the equitymethod which also requires that the carrying value of the investment beevaluated for impairment.   If ComCor-TVdoes not receive the planned increases to its equity capital or other sourcesof financing, the Company's carrying value of Moscow Broadband could beadversely impacted.

 

 

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RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED NOVEMBER 30, 2002 VS.THREE AND NINE MONTHSENDED NOVEMBER 30, 2001For the nine months ended November 30, 2002 and 2001 the Companyreported net loss as follows (in thousands except per share amounts):

November 30, 2002

November 30, 2001

 

Amount

Per Share

Amount

Per Share

Net loss from continuing operations

$      (1,755)

$        (0.83)

$      (1,635)

$        (0.48)

Net income from discontinued operations

132 

0.06 

662 

0.32 

Gain on sale of JM Ney

     1,472 

     0.70 

            - 

          - 

 

 

$         (151)

$        (0.07)

$         (341)

$        (0.16)
   
Continuing Operations - RevenueFor the nine months ended November 30, 2002, revenues totaled$608,000 as compared to $467,000 in the comparable period in the prior fiscalyear.  Significant components of revenueare as follows (in thousands):

 

November 30, 2002

November 30, 2001

Investment gains

$            311 

$             36 

Rental income

214 

254 

Interest and dividends

113 

12 

Ultrasonic royalties

37 

223 

Change in deferred compensation accounts

 (67)

  (58)

 

Total

$           608 

$            467 
   
 Current year rental income was earned from the lease of JM Ney's formermanufacturing facility effective March 22, 2002, while the prior year's rentalincome relates to a property which the Company sold in December 2001.

Continuing Operations - General and Administrative ExpensesGeneral and administrative expenses from continuing operations increased 53.0%to $1,989,000 for the nine months ended November 30, 2002, from $1,300,000 inthe comparable period in the prior fiscal year. For the three months ended November30, 2002, these expenses totaled $693,000, which was 57.9% more than the $439,000of general and administrative expenses incurred in the comparable three-monthperiod in the prior fiscal year.  Higherprofessional fees incurred in connection with the proposed acquisition ofComCor-TV and the preparation of regulatory reports in connection therewith,and depreciation expense on the JM Ney building which, prior to the sale of JMNey'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 anamendment to the Company's deferred benefit pension plan.

Continuing Operations - Interest ExpenseInterest expense from continuing operations for the nine months ended November30, 2002 decreased 33% to $201,000 from $300,000 during the comparable periodin the prior fiscal year.  For the threemonths ended November 30, 2002, interest expense totaled $65,000, whichrepresented a 30.9% decrease from the $94,000 of interest expense incurred inthe comparable three-month period in the prior fiscal year.  The prior year's annual sinking fund paymentof the Company's 10 1/2% convertible subordinated debenture and the repaymentin the prior fiscal year of a note payable to the Company's president loweredaverage debt levels which resulted in the decrease in this expense.Equity in Losses of Moscow BroadbandThe Company's equity in the losses of Moscow Broadband decreased 13.8% to $512,000in the nine months ended November 30, 2002 from $594,000 in the comparableperiod of the prior fiscal year.  For thethree months ended November 30, 2002, the Company's equity in Moscow Broadband'slosses was $172,000, as compared to $183,000 equity in such losses for thecomparable three-month period in the prior fiscal year.  Lower net operating costs at Moscow Broadbandcontributed to lowering the level of losses.Income Tax ExpenseIncome taxes have been accrued based upon estimated effective tax rates forthe fiscal year, after considering valuation allowances related to theCompany's ability to realize a tax benefit from its equity in the losses ofMoscow Broadband. 

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Incomefrom Discontinued OperationsDuring the nine month period ended November 30, 2002, the Company owned JMNey for only 22 days until its sale effective March 22, 2002.  JM Ney's results for that period produced netincome of $132,000 after income taxes.  Duringthe three and nine month periods in the prior fiscal year, JM Ney's operationsproduced net income after income taxes of $283,000 and $945,000, respectively.

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

**LIQUIDITY AND CAPITAL RESOURCES**At November 30, 2002 consolidated cash and marketable securities totaled $8,495,000as compared to $1,607,000 as of February 28, 2002.  The increase of $6,888,000 is primarilyattributable to the receipt of proceeds from the sale of JM Ney's operatingassets, and to the subsequent realization of much of JM Ney's net currentassets that were not sold to the buyer of its operating assets. The Company'sconsolidated net current assets increased from $4,520,000 at February 28, 2002to $6,780,000 as of November 30, 2002.

In April 2002, as amended in September 2002, theCompany entered into agreements, subject to shareholder and regulatoryapprovals, under which the Company will acquire the 50% equity ownership ofComCor-TV owned by COMCOR in exchange for 4,000,000 shares of the Company'scommon stock.  The agreements requireCOMCOR to contribute defined operating assets and additional shares of IAS toComCor-TV.  Such contributions were madein July 2002.  In order to complete thistransaction, the Company is required to acquire substantially all of theoutstanding shares of Moscow Broadband that it currently does not own and tocontribute additional cash and Moscow Broadband's remaining shares of IAS toComCor-TV.  ComCor-TV iscurrently 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 notbe able to continue as a going concern, which could otherwise have asignificant adverse affect on the reported value of the Company's investment inMoscow Broadband.

Subject to shareholder approval, the Company expectsto acquire the Moscow Broadband shares through the issuance of 2,250,000 sharesof the Company's common stock.  TheCompany may issue further additional shares of its common stock to acquireadditional Moscow Broadband shares that may be issued pursuant to a rightsoffering of its common stock.  Atpresent, the Company does not know how much cash will be raised by the MoscowBroadband Rights Offering, or the exact terms of such offering.For the balance of the current year and beyond, the Company is dependent uponits existing cash and short term investments and rental income from Deringerfrom the lease of JM Ney's manufacturing facility, to meet its operatingexpense, preferred dividend and debt service requirements. To the extent thatsuch cash is used to fund additional investment activities of the Company,including, but not limited to investment in ComCor-TV, the Company will havefewer financial resources to meet such obligations.The agreements entered into in April 2002, as amended, pursuant to which theCompany plans to increase its ownership of ComCor-TV require the Company andMoscow Broadband to make cash capital contributions to ComCor-TV totalingapproximately $16.7 million. Approximately $5 million of this amount was paidby Moscow Broadband in May 2002. The Company's board of directors hasrecommended that the Company close on the acquisition agreements only if priorto such closing of the acquisition the Company or Moscow Broadband shall havereceived commitments of $4 million or more of new capital.  In order to meet the payment obligationscontained in the acquisition agreements and its own operating requirements, theCompany expects to raise funds by obtaining a loan collateralized by JM Ney'sreal estate, by selling certain short term investments, or by issuing shares ofits stock in a public or private offering, subject to the limitations containedin the acquisition agreements. The Company may also arrange for ComCor-TV orMoscow Broadband to raise funds, which, if successful, could result in thedilution of the Company's ownership of ComCor-TV.  However, depending on market conditions, suchsources of cash may still be inadequate to meet the scheduled payments intoComCor-TV and still provide the Company with sufficient liquidity to meet itsadministrative expenses and debt service obligations.

OFF BALANCE SHEETARRANGEMENTS

The Company has a contingent liability with respect toa $388,000 letter of credit issued by its bank to secure performance bondsissued in connection with an unresolved state income tax matter.

**Item 3.  Quantitative and QualitativeDisclosures About Market Risk**The Company is exposed to market risk from changes in equity security prices,interest rates and from factors that impact equity investments in Russia, asdiscussed in the Company's Annual Report on Form 10-K for the year endedFebruary 28, 2002.  The followinginformation is presented to update the status of the identified risks. 

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EQUITY SECURITY RISKAt November 30, 2002, the Company has equity risk with respect to $1,328,000of investments in publicly traded financial institutions, and it also has anequity investment in a Ukraine based utility company with a reported value of$5,000.FOREIGN INVESTMENT RISKThe Company has an investment in Moscow Broadband with a carrying value of$2,171,000.  Moscow Broadband's primaryasset is an investment in ComCor-TV, a Moscow, Russia-based broadband cableoperator licensed to provide video, Internet and telephony to up to 1.5 millionhomes and businesses in Moscow. All such investments bear the specificeconomic, currency and political risks of this region.In April 2002, as amended September 2002, the Company entered into agreementswhich, subject to stockholder and regulatory approvals, will result inComCor-TV being substantially wholly-owned by the Company.   The consummation of these transactions willincrease the concentration of both foreign investment risk and the venturecapital risk associated with a start-up company which is experiencing operatinglosses and requires the commitment of funds to meet the capital expenditureneeds of its business plan.  Suchtransactions are also expected to significantly reduce the Company's liquidityas discussed in the Liquidity and Capital Resource section of Item 2 of thisreport.INTEREST RATE RISKThe Company currently has no variable rate obligations and its borrowingcosts are not exposed to changes in interest rates.

**Item 4. Controls and Procedures**As required by Rule 13a-15 under the Securities Exchange Act of1934, as amended (the "Exchange Act"), within the 90 days prior tothe filing date of this report, the Company carried out an evaluation of theeffectiveness of the design and operation of the Company's disclosure controlsand procedures. This evaluation was carried out under the supervision and withthe participation of the Company's management, including the Company'sPresident and Chief Executive Officer along with the Company's Chief FinancialOfficer. Based upon that evaluation, the Company's President and ChiefExecutive Officer along with the Company's Chief Financial Officer concludedthat the Company's disclosure controls and procedures are effective. There havebeen no significant changes in the Company's internal controls, or in otherfactors, which could significantly affect internal controls subsequent to thedate the Company carried out its evaluation. Disclosure controls and procedures are controls and other procedures that aredesigned to ensure that information required to be disclosed in Company reportsfiled or submitted under the Exchange Act is recorded, processed, summarizedand reported within the time periods specified in the Securities and ExchangeCommission's rules and forms. Disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that informationrequired to be disclosed in Company reports filed under the Exchange Act isaccumulated and communicated to management, including the Company's ChiefExecutive Officer and Chief Financial Officer, as appropriate, to allow timelydecisions regarding required disclosure.**Part II. Other Information**** ****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.

(a)     Reportson Form 8-K:  During the three monthsended November  30, 2002, the Companyfiled the following reports on Form 8-K:

(1)     OnSeptember 4, 2002, the Company reported that it had reached agreement to amendthe terms of its planned acquisition of 50% of the outstanding stock ofComCor-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. 

 

 

 

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SIGNATURES

                Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

ANDERSEN GROUP, INC.

 

By:          /s/  Oliver R. Grace, Jr.                Oliver R. Grace, Jr.                President and Chief  Executive Officer

Date:       January  14, 2003

 

By:          /s/ Andrew M. O'Shea                Andrew M. O'Shea                Chief Financial Officer                

Date:       January  14, 2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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**CERTIFICATIONS**

 

I, Oliver R. Grace, Jr., President and Chief Executive Officer ofAndersen Group, Inc., certify that:1.     I have reviewed this quarterly report on Form 10-Q of Andersen Group, Inc.;2.     Based on my knowledge, this quarterly report does not contain any untruestatement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this quarterly report;3.    Based on my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterly report;4.    The registrant's other certifying officer and I are responsible forestablishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the registrant and we have:a)   designed such disclosure controls and procedures to ensure that materialinformation relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularlyduring the period in which this quarterly report is being prepared;b)   evaluated the effectiveness of theregistrant's disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the "EvaluationDate"); and c)      presented in this quarterly reportour conclusions about the effectiveness of the disclosure controls andprocedures based on our evaluation as of the Evaluation Date;5.       The registrant's other certifyingofficer and I have disclosed, based on our most recent evaluation, to theregistrant's auditors and the audit committee of registrant's board ofdirectors (or persons performing the equivalent function):a)      all significant deficiencies inthe design or operation of internal controls which could adversely affect theregistrant's ability to record, process, summarize and report financial dataand have identified for the registrant's auditors any material weaknesses ininternal controls; and b)      any fraud, whether or notmaterial, that involves management or other employees who have a significantrole in the registrant's internal controls; and6.       The registrant's other certifyingofficer and I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

Date: January 14, 2003

/s/ Oliver R. Grace, Jr.

Oliver R. Grace, Jr.

President and Chief Executive Officer

 

 

 

 

 

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**CERTIFICATIONS**

I, Andrew M. O'Shea, Chief Financial Officer of Andersen Group, Inc.,certify that:

1.       I have reviewed this quarterlyreport on Form 10-Q of Andersen Group, Inc.;2.       Based on my knowledge, thisquarterly report does not contain any untrue statement of a material fact oromit to state a material fact necessary to make the statements made, in lightof the circumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;3.       Based on my knowledge, thefinancial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;4.       The registrant's other certifyingofficer and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) forthe registrant and we have:a)      designed such disclosure controlsand procedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;b)      evaluated the effectiveness of theregistrant's disclosure controls and procedures as of a date within 90 daysprior to the filing date of this quarterly report (the "EvaluationDate"); and c)      presented in this quarterly reportour conclusions about the effectiveness of the disclosure controls andprocedures based on our evaluation as of the Evaluation Date;5.       The registrant's other certifyingofficer and I have disclosed, based on our most recent evaluation, to theregistrant's auditors and the audit committee of registrant's board ofdirectors (or persons performing the equivalent function):a)      all significant deficiencies inthe design or operation of internal controls which could adversely affect theregistrant's ability to record, process, summarize and report financial dataand have identified for the registrant's auditors any material weaknesses ininternal controls; and b)      any fraud, whether or notmaterial, that involves management or other employees who have a significantrole in the registrant's internal controls; and6.       The registrant's other certifying officer and I have indicated in thisquarterly report whether or not there were significant changes in internalcontrols or in other factors that could significantly affect internal controlssubsequent to the date of our most recent evaluation, including any correctiveactions with regard to significant deficiencies and material weaknesses.

Date: January 14, 2003

/s/ Andrew M. O'Shea

Andrew M. O'Shea 

Chief Financial Officer 

 

 

 

 

 

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**Exhibit11**

**ANDERSENGROUP, INC.Statement Re: Computation of Per Share Earnings (In thousands, except per share data)**

 

Three Months  EndedNovember 30, 2002
Three Months  EndedNovember 30, 2001

Nine Months  EndedNovember 30, 2002
Nine Months  EndedNovember 30, 2001
 Calculation of basic earnings  per share:
            
Numerator for basic and diluted earnings    per share:
            
 

 

 

 

 

Net loss

$       (544)  

$      (349)   

$    (151)     

$    (690)     

 

Denominator for basic earnings per share:

 

 

 

 

Weighted average number of shares         Outstanding during the period

  2,100   

  2,086     

  2,100     

  2,078      

  

 

 

 

 

  Effect of dilutive securities 

         -  (a)

        - (a)

        - (a)

                -  (a)

 

Denominator for diluted earnings per share

  2,100   

  2,086     

  2,100     

  2,078      

 

Basic earnings per share

$      (0.26)  

$     (0.17)   

$     (0.07)   

$   (0.33)     

 

Diluted earnings per share

 $      (0.26)  

$     (0.17)   

$     (0.07)   

  $   (0.33)     
   
 (a)           Foreach of the three and nine month periods ended November 30, 2002 and 2001, theeffect of outstanding stock options, or the assumed conversion of subordinatedconvertible notes or cumulative preferred stock, were anti-dilutive based uponthe effects that the inclusion of the common stock equivalents would have hadon the Company's reported results from continuing operations.

 

 

 

 

 

 

 

 

 

 

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