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 November 30, 1997
                                       OR
     |_|  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.

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

                             CONNECTICUT 06-0659863

                    (Address of Principal Executive Offices)
                1280 Blue Hills Avenue, Bloomfield, CT 06002-1374
                                 (860) 242-0761

         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 ____

There were  1,935,478  shares of the  Registrant's  Common Stock,  no par value,
outstanding as of January 14, 1998.




<PAGE>
                                                                               
                              ANDERSEN GROUP, INC.
                                    FORM 10-Q

                                TABLE OF CONTENTS

<TABLE>
<S><C>            <C>                                                                                     <C>    

                                                                                                        Page No.

Part I - Financial Information



         Consolidated Balance Sheets
                  November 30, 1997 and February 28, 1997                                                  3

         Consolidated Statements of Operations for the
                  Three and Nine Months Ended November 30, 1997 and 1996                                   4

         Consolidated Statements of Cash Flows for the
                  Nine Months Ended November 30, 1997 and 1996                                             5

         Notes to Consolidated Financial Statements                                                        6

         Management's Discussion and Analysis of Financial Condition
and Results of Operations                                                                                  7



Part II - Other Information

         Item 1 - Legal Proceedings                                                                       11

         Item 3 - Defaults Upon Senior Securities                                                         12

         Item 6 - Exhibits and Reports on Form 8-K                                                        12

         Signatures                                                                                       13

         Exhibit Index                                                                                    14

</TABLE>

<PAGE>


Part I.  Financial Information
Item 1.  Financial Statements
<TABLE>
<S><C>                                                                    <C>   <C>               <C>     <C>    

                                               ANDERSEN GROUP, INC.
                                            Consolidated Balance Sheets
                                                  (In thousands)

                                                                          November 30,1997         February 28, 1997
ASSETS                                                                        (Unaudited)
Current assets:
 Cash and cash equivalents                                                     $ 1,639                   $ 3,219
 Marketable securities                                                          10,246                     5,345
 Accounts and other receivables, less
  allowances of $234 and $190                                                    4,308                     2,773
 Inventories                                                                     9,554                     9,040
 Prepaid expenses and other assets                                                 186                       516
                                                                               -------                   -------

   Total current assets                                                         25,933                    20,893
                                                                               -------                   -------

 Property, plant and equipment                                                  21,800                    20,946
 Accumulated depreciation                                                      (12,597)                  (11,610)
                                                                               -------                   -------
 Property, plant and equipment, net                                              9,203                     9,336
                                                                               -------                   -------
 Prepaid pension expense                                                         4,525                     4,274
 Investment in Digital GraphiX                                                       -                     1,346
 Investment in Institute for Automated Systems                                     892                       835
 Other assets                                                                    2,014                       993
                                                                               -------                   -------

                                                                              $ 42,567                  $ 37,677
                                                                              ========                  ========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
 STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
 Current maturities of long-term debt                                          $   990                   $   773
 Short-term debt                                                                 5,305                     2,305
 Accounts payable                                                                  702                     1,398
 Other current liabilities                                                       5,384                     4,234
                                                                              --------                   -------

   Total current liabilities                                                    12,381                     8,710
                                                                              --------                   -------

Commitments and contingencies

Long term-debt, less current maturities                                          5,986                     7,041
Other long-term obligations                                                      1,631                     1,121
Deferred income taxes                                                            2,286                     2,267

Redeemable convertible Preferred Stock                                           4,760                     4,891
                                                                              --------                   -------

Stockholders' Equity:
 Common stock                                                                    2,103                     2,103
 Additional paid-in capital                                                      3,248                     3,248
 Retained earnings                                                              10,262                     8,386
 Treasury stock                                                                    (90)                      (90)
                                                                              --------                   -------
   Total stockholders' equity                                                   15,523                    13,647
                                                                              --------                   -------

                                                                              $ 42,567                  $ 37,677
                                                                              ========                  ========

See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>


<TABLE>
<S><C>                                    <C>                     <C>                    <C>                         <C>       
                                       ANDERSEN GORUP, INC.
                                 Consolidated Statements of Operations
                                 (In thousands, except per share data)
                                              (unaudited)


                                              Three months ended                                    Nine months ended
                                           November              November                 November                 November
                                           30, 1997              30, 1996                 30, 1997                 30, 1996


Sales and revenues:
 Net sales                                  $ 8,360              $ 5,920                  $22,724                   $19,253
 Investment and other
  income (loss)                                (458)              (1,119)                   3,560                      (860)
                                            -------              -------                  -------                   -------

                                              7,902                4,801                   26,284                    18,393
                                            -------              -------                  -------                   -------


Costs and expenses:
 Cost of sales                                5,426                3,860                   14,645                    12,452
 Selling, general and
  administrative                              2,058                1,844                    5,949                     5,310
 Research and development                       439                  378                    1,259                     1,103
 Interest expense                               283                  198                      772                       599
                                            -------              -------                  -------                   -------

                                              8,206                6,280                   22,625                    19,464
                                            -------              -------                  --------                  -------
Income (loss)
 before income taxes                           (304)              (1,479)                   3,659                    (1,071)
Income tax (expense)
 benefit                                        121                  538                   (1,464)                      375
                                            -------              --------                 -------                   -------

Net income (loss)                              (183)                (941)                   2,195                      (696)

Reversal of preferred
 dividends                                        -                     -                      37                         -
Preferred dividend
 requirement                                   (122)                 (86)                    (356)                     (328)
                                            -------              -------                  -------                   -------

Income (loss) applicable
 to common shares                           ($  305)             ($1,027)                  $1,876                   ($1,024)
                                            =======              =======                  =======                   =======

Earnings (loss) per common share:
 Primary                                     ($0.16)              ($0.53)                   $0.96                    ($0.53)
                                            -------              -------                  -------                   -------

 Fully diluted                               ($0.16)                   -                    $0.88                         -
                                           ========              =======                  =======                   =======

Weighted average common
 and common equivalent
 shares outstanding                       1,964,974            1,946,051                1,958,293                 1,946,051


See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>

<TABLE>
<S><C>                                                                            <C>                                              

                                               ANDERSEN GROUP, INC.
                                       Consolidated Statements of Cash Flows
                                                  (In thousands)
                                                    (unaudited)
                                                                              Nine months ended November 30,
                                                                                  1997                   1996


Cash flows from operating activities:
Net income (loss)                                                                $2,099                  ($696)
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating
activities:
   Depreciation, amortization and accretion                                       1,099                   1,004
   Deferred income taxes                                                          1,015                    (258)
   Pension income                                                                  (251)                   (185)
   Net realized and unrealized gains from
     marketable securities and investments                                       (2,945)
                                                                                                     1,580
   Purchases of marketable securities                                            (2,128)
                                                                                                     (1,124)
   Sales of marketable securities                                                     -                     437

Changes in operating assets and liabilities:
   Accounts and notes receivable                                                 (1,535)                    573
   Inventories                                                                     (514)                  1,094
   Prepaid expenses and other assets                                                 91                    (878)
   Accounts payable                                                                (986)                 (2,266)
   Accrued expenses and other long-term
    obligations                                                                     227                    (529)
                                                                                 ---------              --------

   Net cash used for operating activities                                        (3,732)                 (1,248)
                                                                                 ------ -               -------

Cash flows from investing activities:
   Purchases of property and equipment                                           (1,368)                 (1,053)
   Proceeds from sale of property, plant
    and equipment                                                                     -                      28
   Investments in other assets                                                        -                    (105)
   Proceeds from collection of investment
    in Digital GraphiX                                                            1,518                       -
                                                                                 ------                 -------

   Net cash provided by (used for) investing
    activities                                                                      150                  (1,130)
                                                                                 ------                  ------

Cash flows from financing activities:
   Principal payments on long-term debt                                            (838)                   (698)
   Issuance of short-term debt, net                                               3,000                   1,028
   Redemption of Preferred Stock                                                   (160)                      -
   Capitalized lease obligations incurred                                             -                     407
                                                                                 ---------              -------

   Net cash provided by financing activities                                      2,002                     737
                                                                                 ----------             -------

   Net decrease in cash and cash equivalents                                     (1,580)                 (1,641)
   Cash and cash equivalents - beginning of period                                3,219                   4,116
                                                                                 ------                 -------

   Cash and cash equivalents - end of period                                     $1,639                 $ 2,475
                                                                                 ======                 =======

See accompanying notes to consolidated financial statements.

</TABLE>


<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)      Accounting Policies

         The accompanying  interim financial statements and related notes should
be read in conjunction  with the Consolidated  Financial  Statements of Andersen
Group, Inc. and related notes as contained in the Annual Report on Form 10-K for
the fiscal  year ended  February  28,  1997.  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 have been made to the prior
period  financial  information  so  that  it  conforms  to  the  current  period
presentation.

 (2)      Marketable Securities

         During the  fourth  quarter of fiscal  1997 and the nine  months  ended
November 30, 1997, the Company  invested a total of $2,083,000 in a portfolio of
Eastern European equity securities.  Of this amount,  $1,450,000 was invested in
Russian equity securities managed by a third party advisor. At November 30, 1997
the  reported  market  value of this  portfolio  was  approximately  $4,401,000.
However,  due to concerns,  regarding the volatility of these securities markets
and  liquidity  issues,  the Company has recorded  these  investments  net of an
$880,000  reserve,  for  a  net  carrying  value  of  approximately  $3,521,000.
Accordingly, the Company has recorded a writedown in the value of this portfolio
of  $1,190,000  for the three  months ended  November  30,  1997,  while the net
appreciation  related to this  portfolio  recorded  during the nine months ended
November 30, 1997, is approximately $1,438,000.

(3)      Inventories

Inventories consisted of the following:
<TABLE>
<S><C>   <C>                                              <C>                     <C>   
                                                                  (In thousands)
                                                        November 30,           February 28,
                                                            1997                   1997

         Raw materials                                  $  4,861               $  3,111
         Work in process                                   4,709                  3,877
         Finished goods                                    1,909                  2,955
                                                        ---------              ---------
                                                          11,479                  9,943
         LIFO reserve                                     (1,925)                (  903)
                                                        ---------              ---------
                                                        $  9,554               $  9,040
                                                        ========               ========

</TABLE>

(4)      Income Taxes

         Income tax  (expense)  benefit  represents an estimate of the effective
income tax rate for the current fiscal year.

(5)      Dividends

         The  Company's  Series A Redeemable  Cumulative  Convertible  Preferred
Stock (the "Preferred Stock") is entitled to accrue quarterly  dividends ranging
from $.1875 to $.4375 per share,  based upon the  consolidated  operating income
(as defined) of The J.M. Ney Company ("Ney"),  a wholly-owned  subsidiary of the
Company. Due to restrictions in the Company's debt covenants as discussed below,
no dividends were declared on the Preferred Stock during the three or nine month
periods  ended  November  30,  1997,  although  they were accrued at the rate of
$0.4375 and $1.2513 per share,  respectively.  Under the terms of the  Company's
10.5% Convertible Subordinated Debentures,  the Company has been restricted from
paying  dividends on its capital  stock since April 1993 and will continue to be
restricted until such time as the Company's cumulative consolidated earnings, as
defined,  reach  specified  amounts.  Through  November 30, 1997,  approximately
$1,224,000  has  been  accrued  for this  arrearage.  (For  further  information
concerning  the Company's  ability to pay dividends on or purchase or redeem its
capital stock see the Liquidity and Capital  Resources  Section of  Management's
Discussion and Analysis of Financial  Condition and Results of  Operations,  and
also Part II, Item 3 -Defaults Upon Senior Securities).



<PAGE>


(6)      Earnings Per Share

         Earnings per share is computed based on the weighted  average number of
common and common equivalent shares outstanding. Fully diluted net income (loss)
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
anti-dilutive.  (For the current  fiscal  year,  see  Exhibit 11 - Statement  re
Computation  of Per Share  Earnings.)  The effect of the assumed  conversion  of
convertible securities was anti-dilutive in the prior fiscal year.

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting  Standards No. 128,  Earnings Per Share (SFAS
128),  effective for periods ending after December 15, 1997. This statement will
replace the presentation of primary earnings per share (EPS) with basic EPS, and
fully  diluted EPS with diluted EPS. For the three and nine month  periods ended
November 30, 1997,  basic EPS would not be materially  different from that which
is presented as primary EPS,  while diluted EPS would have been  unchanged  from
that which is presented as fully diluted EPS.

(7)      Subsequent Events

         In  December  1997,   Ney  entered  into  a  seven-year   $7.5  million
subordinated  loan agreement with its commercial bank. Under the loan agreement,
which  calls for  quarterly  interest-only  payments  at the rate of 10.26%  per
annum,  Ney issued  warrants to purchase 40,000 shares of Ney common stock at an
average exercise price of $2.35 per share.

     Item 2.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations

         For the three months ended  November 30, 1997,  the Company  recorded a
net loss  applicable  to common  shares of  $305,000,  or $0.16  per  share,  as
compared to a net loss of  $1,027,000,  or $0.53 per share,  for the  comparable
quarter in the prior fiscal year.

         For the nine months ended November 30, 1997,  the Company  recorded net
income  applicable to common shares of $1,876,000,  or $0.96 per share,  primary
and $0.88 per share, fully diluted. This compares with a net loss of $1,024,000,
or $0.53 per share for the nine months ended November 30, 1996.

REVENUES
         Revenues  for  the  three  months  ended   November  30,  1997  totaled
$7,902,000,  which is a 64.6% increase from the revenues  reported for the prior
fiscal year's third quarter. This increase represents the combination of a 41.2%
increase  in sales and a decrease of $661,000  in  investment  and other  income
(loss).  Through the nine-month period ended November 30, 1997, revenues totaled
$26,284,000, or an increase of 42.9% over the prior year's comparable nine-month
total.  Sales increases of 18.0% and an increase of $4,420,000 in investment and
other income produced the year-over-year revenue growth.

         During the three months ended November 30, 1997,  the Company  recorded
net  investment  losses of  $1,190,000  relating to both realized and changes in
unrealized  investment  gains and losses from a portfolio of Russian and Eastern
European  marketable equity  securities.  For the nine months ended November 30,
1997,  such net investment  gains totaled  $1,438,000.  The three and nine month
reported gains and losses have been reflected net of a decrease of $139,000 in a
valuation  allowance  for the three  months  then ended,  and a net  increase of
$880,000 of such valuation allowance for the nine months then ended. At November
30, 1997, this portfolio of investments  was recorded at $3,521,000,  net of the
aforementioned $880,000 valuation allowance.

         Additionally,  increases in unrealized gains from a portfolio of common
stocks,  primarily  comprised of financial  institutions,  produced increases in
unrealized  gains of $517,000 and  $1,312,000,  respectively,  for the three and
nine-month  periods  ended  November 30, 1997.  In the prior fiscal year,  these
investments  produced  investment gains of $468,000 and $594,000,  respectively,
during the  comparable  three and nine month  periods.  During the prior  fiscal
year's first nine months,  the Company also recorded a $954,000 writedown in the
market value of its common stock  investment  in Phoenix  Shannon,  p.l.c.  This
entire investment,  along with a $1 million note receivable from Phoenix Shannon
was written off in the third quarter of the prior fiscal year.

         The sales  growth  reflects  three and nine month  growth rates for the
J.M. Ney Company ("J.M.  Ney") of 35.5% and 13.8%,  respectively,  and three and
nine month growth rates of 75.3% and 41.0%,  respectively,  for Ney  Ultrasonics
Inc. ("Ney  Ultrasonics").  The continued  expansion of J.M. Ney's manufacturing
platform  has  supported  growth  in  a  few  key  customer  relationships.  Ney
Ultrasonics  continues to experience  sales growth as further evidence of market
acceptance  of its  products.  At  November  30,  1997,  sales  backlog for this
division was a record $2.2 million.

COST OF SALES
         Cost of sales for the three  months ended  November 30, 1997,  reflects
margins of 35.1% versus  margins for the prior  year's  third  quarter of 34.8%.
Year-to-date margins are 35.6%, versus 35.3% for the first three-quarters of the
prior  fiscal year.  The  short-term  impact of rapid  increases in the costs of
palladium  and platinum  during the nine months ended  November 30, 1997 had the
effect of  reducing  margin  improvements  that would have been  otherwise  more
significant.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
         Selling, general and administrative expenses for the three months ended
November 30, 1997 totaled  $2,058,000,  or 11.6% greater than the costs incurred
during the comparable period in the prior fiscal year. Year-to-date,  such costs
totaled  $5,949,000,  or 12.0%  greater than the prior fiscal year's nine months
year-to-date totals. Increased personnel recruitment expenses, costs relating to
a new software implementation process and increased costs at Ney Ultrasonics due
to staff additions, have contributed to these expenses increasing these costs.

RESEARCH AND DEVELOPMENT EXPENSES
         Research and development costs increased 16.1% and 14.1%, respectively,
during the three-month  and nine-month  periods ended November 30, 1997 over the
comparable  periods in the prior fiscal year. Such increases  primarily  reflect
increased  sales  activity and the continued  commitment to support future sales
growth.

INTEREST EXPENSE
         Interest  expense  during the three  months  ended  November  30,  1997
totaled  $283,000,  or 42.9% greater than interest expense incurred in the third
quarter of the prior fiscal year. For the  nine-month  period ended November 30,
1997, the increase in interest  expense over the prior year totaled  $173,000 or
28.9%.  Increased  borrowings at J.M. Ney to support its working  capital growth
needs,  as well as those of Ney  Ultrasonics,  to fund  facility  expansion  and
capital  expenditures,  as well as significant  increases in the borrowing rates
related to a financing  program for  palladium  and  platinum,  offset the lower
interest costs associated with the reduction of the outstanding principal amount
of the Company's 10.5% Convertible Subordinated  Debentures.  Although borrowing
rates for  palladium  and platinum have come down from peak levels noted in June
and July 1997,  they remain at relatively high levels of  approximately  10% per
annum.  J.M. Ney utilizes such  programs  primarily to hedge its exposure on its
precious metal refining activities, and has instituted additional charges to its
customers to reflect these market conditions.

INCOME TAXES
         Income  taxes have been  accrued at rates which the  Company  estimates
will approximate its effective income tax rate for the year. Estimates of timing
differences  between financial reporting and income tax reporting have been made
and reflected in changes to the deferred income tax liability accounts.

PREFERRED DIVIDENDS
         Preferred dividends,  including the amortization of issuance discounts,
totaled $122,000 for the quarter ended November 30, 1997, versus $86,000 for the
prior year's third fiscal  quarter.  This increase  reflects the net of improved
operating  income  of J.M.  Ney and  Ney  Ultrasonics,  on  which  the  dividend
calculation is based, and fewer preferred shares  outstanding,  due to purchases
of Preferred  Stock in both the fourth  quarter of the prior fiscal year and the
second quarter of this year.

         Such  dividends  total  $356,000 for the nine months ended November 30,
1997,  versus  $328,000 for the first nine months of the prior fiscal year.  Per
share dividend accruals have increased from approximately  $0.9822 per preferred
share for the nine months ended November 30, 1996 to  approximately  $1.2513 for
the  current  fiscal  year's  first  nine  months,  however,  fewer  outstanding
preferred shares have resulted in the smaller year over year increase.

         During the previous quarter,  the Company purchased 8,744 shares of the
Preferred  Stock  resulting in a reversal of  previously  accrued  dividends and
accreted discounts of $37,000.



<PAGE>


LIQUIDITY AND CAPITAL RESOURCES
         At  November  30,  1997,  the  Company's  cash,  cash  equivalents  and
marketable  securities totaled $11,885,000,  an increase of 38.8% over the total
of  $8,564,000  recorded at February  28,  1997.  The  increase is the result of
$2,751,000  of  recorded   appreciation  of  securities   within  the  Company's
investment  portfolio  of  securities  of Russian  and Eastern  European  equity
securities and common stock investments in financial institutions and Centennial
Cellular  (the  purchaser of the Company's  former  cellular  operations).  This
appreciation has been recorded net of a valuation  reserve of $880,000  relating
to the Russian and Eastern European  investments.  At November 30, 1997, the net
carrying value of the total Eastern European portfolio was $3,521,000, while the
portfolio  of  financial  institutions  was  valued  at  $5,184,000.  Additional
liquidity was also generated from the receipt of two  liquidating  dividends and
principal  payments on a note receivable from Digital  GraphiX,  which is now in
the final stages of its liquidation.

         During the first nine months of the current  fiscal  year,  the Company
repurchased  $622,000  principal  amount of its 10.5%  Convertible  Subordinated
Debentures.  Accordingly,  the sinking fund  requirements of the issue have been
fulfilled  for the  current  fiscal  year,  and a credit  of  $165,000  has been
generated towards next year's requirement of $834,000.

         On January  12,  1998 the  Company  announced  the  commencement  of an
Exchange Offer for its 10.5% Convertible  Subordinated  Debentures due 2002 (the
"Debentures").  The Exchange  Offer will expire at 5:00 p.m.,  Eastern  Standard
Time, on Tuesday,  February 19, 1998,  unless extended (the "Expiration  Date").
Pursuant to the terms of the  Exchange  Offer,  the  Company  offers to exchange
$1,000.00 principal amount of 10.5% Convertible Subordinated Debentures due 2007
(the "New  Debentures")  and $10.00 cash (the "Cash Payment") for each $1,000.00
principal amount of the Debentures.

         In the event that at least 66 2/3% in aggregate principal amount of the
outstanding Debentures are tendered for exchange pursuant to the Exchange Offer,
the Company shall (i) exchange the Debentures  properly  tendered to it pursuant
to the Exchange Offer and, except as provided in the next  paragraph,  (ii) have
the right,  but not the obligation,  to purchase and redeem all Debentures which
have  not  been  so  tendered  pursuant  to the  terms  of the  Debentures  at a
redemption  price of 100% of the principal  amount thereof plus accrued interest
to the date of redemption.

         In addition, as part of an overall program to restructure the Company's
financial structure,  if at least 66 2/3% of outstanding Debentures are tendered
as described above,  and certain other conditions are met, as described  herein,
the Company shall, in addition to exchanging the Debentures properly tendered to
it, purchase and redeem all Debentures which have not been so tendered  pursuant
to the terms of the  Debentures  at a redemption  price of 100% of the principal
amount  thereof plus accrued  interest to the date of  redemption.  The Exchange
Offer is  conditioned  on the  approval  of a  proposal  to amend the  Company's
Certificate of  Incorporation  ("Certificate")  by the requisite  percentages of
each class of equity stockholders  entitled to vote thereon at a Special Meeting
("Meeting")  which the Company intends to call on or about February 25, 1998. At
this  Meeting,   the  Company's  Common  Stockholders  and  Series  A  Preferred
Stockholders  will be asked to approve an  amendment  to the  Certificate  which
eliminates  certain  restrictions  on the payment of dividends on the  Company's
Common Stock and on the Series A Preferred  Stock and which makes  certain other
changes in the  redemption  provisions  of the  Series A  Preferred  Stock.  For
purposes of this Special  Meeting,  the Company will  implement  the proposal if
more than  fifty  percent  of the  Common  Stockholders  voting  at the  Meeting
approve,  and  if  eighty-five  percent  or  more  of  the  Series  A  Preferred
Stockholders entitled to vote thereat approve the proposal.

         In the event that less than 66 2/3% in  aggregate  principal  amount of
the  outstanding  Debentures are tendered for exchange  pursuant to the Exchange
Offer,  the Company has the right,  but not the obligation,  to (i) exchange the
Debentures  properly  tendered to it pursuant to the Exchange  Offer and/or (ii)
purchase and redeem all Debentures  which have not been so tendered  pursuant to
the  terms of the  Debentures  at a  redemption  price of 100% of the  principal
amount thereof plus accrued interest to the date of redemption.

         The Exchange Offer is also subject to certain customary conditions, any
or all of which may be waived by the Company.

         Certain  affiliates of the Company have agreed to tender all Debentures
they  beneficially  own pursuant to the Exchange Offer. As of December 31, 1997,
these Debentureholders  beneficially owned in the aggregate $2,274,000 principal
amount  of  Debentures,  representing  approximately  40.14%  of  the  aggregate
principal amount of the Debentures.

         The New Debentures contain essentially the same terms and conditions as
the Debentures,  except that the New Debentures (i) mature five years later than
the Debentures,  (ii) do not impose  covenants on the Company which restrict the
payment of dividends on, or repurchases  of, its capital stock and (iii) are not
subject to optional redemption by the Company.

         Both the Debentures and the New  Debentures  are  convertible  into the
Company's Common Stock at any time prior to maturity, unless redeemed, at $16.17
per share, subject to adjustment under certain conditions.

         The  Exchange  Offer will not have a material  effect on the  Company's
Consolidated Statements of Operations.  However, the Exchange Offer could have a
material  effect on the Company's cash if the Company is required to redeem,  or
elects to redeem, the Debentures which have not been tendered. Assuming that the
Company has to purchase and redeem up to 33 1/3% in aggregate  principal  amount
of the outstanding  Debentures,  on a pro forma and forward  looking basis,  the
total  cash  requirements  of the  Exchange  Offer  will be  approximately  $2.5
million, as detailed below:

         (i) the Company will have to pay approximately $456,000 to purchase and
retire certain long-term debt, which is senior to the Debentures

     (ii) the  Company  will have to pay up to  approximately  $1.9  million  to
purchase and redeem up to 33 1/3% of the Debentures; and

         (iii) the Company will have to pay the Cash Payment and the expenses to
be incurred in the Exchange Offer of approximately $115,000.

         In addition, if the restrictive  covenants,  contained in the indenture
to the  Debentures,  are  eliminated,  the Company  will have to pay the accrued
dividend  arrearage  on the  Preferred  Stock of  approximately  $1.2 million.

         The Company intends to fund these cash  requirements with its available
cash.  In the event  that its  available  cash is not  sufficient  to cover this
requirement,  the Company  intends to sell some of its marketable  securities to
satisfy any shortage.  The amount of the cash  requirement  will be decreased to
the extent that more than 66 2/3% in aggregate  principal  amount of  Debentures
outstanding are tendered for exchange pursuant to the Exchange Offer.

         In December  1997,  J.M. Ney borrowed  $7.5 million  under a seven-year
subordinated  note.  Proceeds  of this  borrowing  have been used to reduce J.M.
Ney's  borrowing  under its  revolving  line of credit  and to pay  intercompany
dividends  to the  Company.  Future  uses of these  remaining  funds  from  this
borrowing  may include,  among other  things,  capital  expenditures  to support
planned  growth.  The  Company  is not a  guarantor  of  either  the  seven-year
subordinated note or J.M. Ney's revolving line of credit facility.

     The Company believes that, for the foreseeable  future, the working capital
and debt serving requirements of its operating  subsidiaries can be sufficiently
met through availability under J.M. Ney's line of credit,  available lease lines
and from its  operations.The  Company also believes that its own working capital
and debt  service  requirements  can be met  through  existing  cash  resources,
defined  payments from J.M. Ney,  sales or leveraging of investments or from its
investment income.

         The indenture relating to the Company's 10.5% Convertible  Subordinated
Debentures  contains a covenant  restricting  the  payment of  dividends,  on or
repurchases  or redemptions  of the Company's  capital  stock.  As the result of
Preferred Stock  repurchases and losses incurred in recent years, the Company is
currently  prohibited  by such  covenant  (except as provided by a Capital Stock
Purchase  Program,  which has been approved by a majority in principal amount of
the non-affiliated  bondholders,  that solely permits the Company to purchase up
to $6.0  million of capital  stock) from making such  payments on the  Preferred
Stock  or the  Common  Stock  until  such  time as the sum of (i) the  aggregate
cumulative  consolidated  net  income;  (ii) the  aggregate  net  cash  proceeds
received by the Company from sales of shares of its capital stock for cash;  and
(iii) the  aggregate  net cash  proceeds  received by the Company  from sales of
indebtedness of the company convertible into stock of the Company, to the extent
such stock has been  converted  into  stock of the  Company  (collectively,  the
"Consolidated  Net  Income")  exceeds  the sum of the  aggregate  amount  of all
dividends  declared and all such other payments and  distributions on account of
the  purchase,  redemption  or other  retirement  of any  shares of stock of the
Company (collectively, the "Distributions"). At November 30, 1997, Distributions
exceeded Consolidated Net Income by approximately $2,247,000 and the Company had
utilized  approximately  $550,000 of the $6.0 million available  pursuant to the
Capital Stock Purchase program to purchase shares of the Preferred Stock.

FORWARD-LOOKING STATEMENTS
         This report contains  forward-looking  statements,  estimates or plans,
which involve known and unknown risks, uncertainties and other factors which may
cause the actual  results,  performance  or  achievements  of the  Company to be
materially  different  from  results  or  plans  expressed  or  implied  by such
forward-looking statements.

Part II.  Other Information

Item 1.  Legal Proceedings

         As previously reported in the Company's Form 10-Q for the Quarter ended
August 31, 1997, in August 1997, The J.M. Ney Company  ("Ney") was included as a
defendant  in an  asbestos  related  civil  action for  negligence  and  product
liability filed in the Court of Common Pleas of Allegheny  County,  Pennsylvania
entitled, JAMES S. CATHERS AND SYLVIA JEAN CATHERS, HIS WIFE (collectively,  the
"Plaintiffs") v. KERR CORPORATION,  WHIP-MIX  CORPORATION,  THE J.M. NEY COMPANY
AND DENTSPLY CORPORATION,  INC. (collectively,  the "Defendants"),  in which the
Plaintiffs  claim damages in excess of $30,000 (the  jurisdictional  limit) from
being  exposed  to  asbestos  and  asbestos   products   alleged  to  have  been
manufactured  and supplied by the  Defendants,  including  Ney's  former  Dental
Division,  while one of the Plaintiffs worked in a dental lab from 1960 to 1986.
The  Plaintiffs  allege that this  exposure to asbestos  and  asbestos  products
caused one of the Plaintiffs to develop  mesothelioma.  The Plaintiffs  have not
provided  any  specific  allegations  of facts as to which  Defendants  may have
manufactured  or supplied  asbestos and asbestos  products  which are alleged to
have caused the injury.

         The Company is  investigating  whether any  liability may be subject to
reimbursement in whole or in part from insurance proceeds.  As of this date, the
Company  has no basis to  conclude  that the  litigation  may be material to the
Company's financial condition or business.  Accordingly,  the Company intends to
vigorously defend the lawsuit.

         As previously  reported in the Company's Annual Report on Form 10-K for
the year ended  February 28, 1997, in July 1996,  two lawsuits were filed in the
United  States   District   Court  for  the  District  of  New  Jersey,   MORTON
INTERNATIONAL,  INC. v. A.E. STALEY MFG. CO. et al, and VELSICOL  CHEMICAL CORP.
V. A.E.  STALEY MFG. CO. et al, in which Morton and  Velsicol,  assert a private
right  of  action  pursuant  to  the   Comprehensive   Environmental   Response,
Compensation  and Liability Act ("CERCLA")  against  approximately 95 companies,
including  The  J.M.  Ney  Company  ("Ney"),  relating  to the  Ventron/Velsicol
Superfund Site located in Wood Ridge and Carlstadt,  New Jersey (the "Site"). In
addition, in December 1996, Morton and Velsicol filed a First Amended Complaint,
alleging an alternative basis for liability under the Resource  Conservation and
Recovery Act ("RCRA").  Specifically, the plaintiffs allege that Ney was among a
group of companies  that were  generators  of hazardous  substances,  which were
ultimately processed at the Site and contributed to the alleged contamination at
the Site. The suits, which duplicate each other in all material  respects,  seek
to recover the plaintiff's  unspecified  past and future costs of remediation of
the Site. The investigation at the Site to determine the extent of contamination
has not been  completed  and no plan for  remediation  has been  developed.  The
plaintiffs  have not been able to  provide  the  defendants  with any  confirmed
figures with respect to past costs and no figures at all for its future costs.

     Based on preliminary  disclosure of information relating to the claims made
by plaintiffs and  defendants Ney is one of the smaller  parties to have had any
transactions with one of the plaintiff's  predecessors in interest.  However, at
this time,  there is  insufficient  information  to  determine  the  appropriate
allocation  of costs  between  or among  the  defendants,  if  liability  to the
generator defendants is ultimately proved.

         The Company is investigating whether any liability, which may accrue at
some  future  date,  may be  subject to  reimbursement  in whole or in part from
insurance  proceeds.  As of this date, the Company has no basis to conclude that
the litigation may be material to the Company's financial condition or business.
Accordingly, the Company intends to vigorously defend the lawsuit.



<PAGE>


Item 3.  Defaults Upon Senior Securities

         As discussed in Note 5 to Consolidated Financial Statements, Dividends,
and in  Management's  Discussion  and  Analysis  of  Results of  Operations  and
Financial  Condition  -  Liquidity  and  Capital  Resources,  the Company is not
permitted  to pay  dividends  on any of its capital  stock.  As a result of this
restriction, the Company was precluded from paying the Preferred Stock dividends
earned for each of the four quarters in fiscal years 1994,  1995, 1996 and 1997,
respectively,  and is precluded from paying the Preferred Stock dividends earned
for each of the three  quarters  ended  November 30, 1997.  These  dividends are
ordinarily payable within 45 days after the end of the quarter. Therefore, while
the quarterly fiscal 1994 through August 31, 1997 dividends are in arrears,  the
dividend for the quarter  ended  November  30, 1997,  which was in the amount of
$.4375  per  share,  will be in  arrears on  January  16,  1998.  The  aggregate
arrearage  for all  dividends  (including  that  payable on January 15, 1998) is
$1,224,000.

         As of October 16, 1994, the Company was in arrears for six  consecutive
quarters in the payment of the  dividends on the Preferred  Stock.  The terms of
the  Preferred  Stock provide that once the Company is in arrears on the payment
of the  dividends  on the  Preferred  Stock for six  consecutive  quarters,  the
holders of the  Preferred  Stock,  voting  together as a class,  are entitled to
elect one additional  director to the Company's Board of Directors at any annual
meeting of  shareholders  or a special  meeting held in place  thereof,  or at a
special  meeting  of the  holders of the  Preferred  Stock.  If,  and when,  the
dividends  which are in arrears on the  Preferred  Stock shall have been paid or
declared and set apart for payment,  the rights of the holders of the  Preferred
Stock to elect such  additional  director shall cease (but always subject to the
same provisions for the vesting of such voting rights in the case of any similar
future  arrearages in  dividends),  and the term of office of any person elected
director by the holders of the Preferred  Stock shall  terminate.  As of January
14, 1998,  no special  meeting of the  Preferred  Stockholders  has been held or
scheduled.


Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibits required by Item 601 of Regulation S-K

         Exhibit 11.1  Statement re  Computation  of Per Share  Earnings for the
         three months ended November 30, 1997.

         Exhibit 11.2  Statement re  Computation  of Per Share  Earnings for the
         nine months ended November 30, 1997.

         Exhibit 27.1 Financial Data Schedule for the nine months ended November
         30, 1997.

         Exhibit 27.2 Restated Financial Data Schedule for the nine months ended
         November 30, 1996.

(b)      Reports on Form 8-K

         There were no Form 8-Ks filed by the  Company  during the period  ended
         November 30, 1997;  however,  on December 30, 1997, the Company filed a
         Current  Report on Form 8-K to  disclose  a change  of its  independent
         accounting  firm. In addition,  on January 12, 1998,  the Company filed
         Amendment No. 1 to its Current  Report on Form 8-K,  dated December 23,
         1997,  attaching  as Exhibit 16 to such filing a letter from its former
         independent  accountants in which they stated their  agreement with the
         disclosures contained in Item 4 to Form 8-K.





<PAGE>



         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:    January 14, 1998



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

Date:     January 14, 1998



<PAGE>


                                                   EXHIBIT INDEX

<TABLE>
<S><C>         <C>                                                                           <C>    


   EXHIBIT                                                                                 PAGE NO.
     NO.                                     DESCRIPTION

    11.1       Statement re Computation of Per Share Earnings for the Three Months            15
               Ended November 30, 1997

    11.2       Statement re Computation of Per Share Earnings for the Nine Months             16
               Ended November 30, 1997

    27.1       Financial Data Schedule for the Nine Month Period Ending                       17
               November 30, 1997

    27.2       Restated Financial Data Schedule for the Nine Month Period Ending              18
               November 30, 1996




</TABLE>