UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

     |X|  QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 1998
                                       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.
             (Exact name of Registrant as specified in its charter)

     DELAWARE                                             06-0659863
     (State or other jurisdiction of incorporation      (I.R.S. Employer
           or organization)                            Identification No.) 


     515 Madison Avenue, Suite 2000, New York, New York         10022 
     (Address of principal executive offices)                  (Zip Code)

                               (212) 826-8942
     (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____


  As of October 9, 1998,  there were 1,940,582 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 1,958,478


<PAGE>

                              ANDERSEN GROUP, INC.
                                    FORM 10-Q

                                TABLE OF CONTENTS


                                                             Page No.

Part I - Financial Information

         Item 1 - Financial Statements:

                  Consolidated Balance Sheets
                    August 31, 1998 and February 28, 1998               3  

                  Consolidated Statements of Operations for the         4
                    Three and Six Months Ended August 31, 1998 and 1997  

                  Consolidated Statements of Cash Flows for the         5
                    Six Months Ended August 31, 1998 and 1997

                  Notes to Consolidated Financial Statements            6 

         Item 2 - Management's Discussion and Analysis of               8
                    Financial Condition and Results of Operations        

         Item 3 - Quantitative and Qualitative Disclosures About        10
                     Market Risk                                    


Part II - Other Information

         Item 1 - Legal Proceedings                                     11

         Item 4 - Submission of Matters to a Vote of Security Holders   12

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


Signatures                                                              13







<PAGE>


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

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

                                                                          August 31, 1998                February 28, 1998
                                                                          ---------------                -----------------
ASSETS                                                                      (Unaudited)
Current assets:
   Cash and cash equivalents                                                  $ 5,273                        $ 2,516
   Marketable securities                                                        6,301                          9,001
   Receivable from sale of subsidiary                                             500                          3,521
   Accounts and other receivables, less
     allowances of $151 and $130                                                2,955                          3,870
   Inventories                                                                  5,338                          8,076
   Deferred income taxes receivable                                               632                              -
   Prepaid expenses and other assets                                              111                            142
                                                                              -------                        -------

     Total current assets                                                      21,110                         27,126
                                                                              -------                        -------

Property, plant and equipment                                                  22,349                         21,854
Accumulated depreciation                                                      (12,950)                       (12,411)
                                                                              -------                        -------

     Property, plant and equipment, net                                         9,399                          9,443
                                                                              -------                        -------

Prepaid pension expense                                                         4,879                          4,665
Investments                                                                       206                          1,815
Other assets                                                                    2,018                          1,722
                                                                              -------                        -------

                                                                              $37,612                        $44,771
                                                                              =======                        =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current maturities of long-term debt                                       $   595                         $  595
   Short-term borrowings                                                        1,370                          2,183
   Accounts payable                                                               696                            951
   Accrued liabilities                                                          2,650                          3,352
   Deferred income taxes                                                            -                          1,286
                                                                              -------                        ------- 

     Total current liabilities                                                  5,311                          8,367
                                                                                                     

Long-term debt, less current maturities                                         4,370                          4,459
Subordinated note payable, net of unamortized discount                          7,314                          7,300
Other long-term obligations                                                     1,949                          1,888
Deferred income taxes                                                           1,954                          2,561
                                                                              -------                        -------

     Total liabilities                                                         20,898                         24,575
                                                                              -------                        -------

Stockholders' equity:
   Cumulative convertible preferred stock                                       4,776                          4,769
   Common stock                                                                    20                          2,103
   Treasury stock                                                                 (83)                           (82)
   Additional paid-in capital                                                   5,340                          3,248
   Retained earnings                                                            6,661                         10,158
                                                                              -------                        -------        

     Total stockholders' equity                                                16,714                         20,196
                                                                              -------                        -------

                                                                              $37,612                        $44,771
                                                                              =======                        =======
                                                                                                      
See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>

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

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


                                                  Three Months Ended                       Six Months Ended
                                          August 31, 1998     August 31, 1997    August 31, 1998     August 31, 1997
                                          ---------------     ---------------    ---------------     ---------------
Revenues:
   Net sales                                  $ 5,938             $ 5,618            $13,623             $11,666
   Investment and other income (loss)          (4,822)              3,728             (4,676)              4,018
                                             --------            --------           --------            --------

                                                1,116               9,346              8,947              15,684
                                             --------            --------           --------            --------

Costs and expenses:
   Cost of sales                                3,852               3,681              9,022               7,656
   Selling, general and administrative          1,822               1,574              3,446               3,012
   Research and development                       465                 336                952                 681
   Interest expense                               525                 261                986                 489
                                             --------            --------           --------            --------

                                                6,664               5,852             14,406              11,838
                                             --------            --------           --------            --------

Income (loss) from continuing
  operations before income taxes               (5,548)              3,494             (5,459)              3,846
Income tax expense (benefit)                   (2,197)              1,406             (2,161)              1,541
                                             --------            --------           --------            --------

Income (loss) from continuing
  operations                                   (3,351)              2,088             (3,298)              2,305
Income from discontinued operations
  net of income taxes                               -                  23                  -                  73
                                             --------            --------           --------            --------

Net income (loss)                              (3,351)              2,111             (3,298)              2,378
Reversal of preferred dividends                     -                  37                  -                  37
Preferred dividends                               (96)               (108)              (199)               (234)
                                             --------            --------           --------            --------     

Income (loss) applicable to common
  shares                                     ($ 3,447)            $ 2,040            ($3,497)             $2,181
                                             ========            ========           ========            ========

Earnings (loss) per common share:
   Basic
     Continuing operations                     ($1.77)              $1.04             ($1.80)              $1.09
     Discontinued operations                        -                0.01                  -                0.04
                                             --------             -------            -------             -------
     Net income (loss)                         ($1.77)              $1.05             ($1.80)              $1.13
                                             ========             =======            =======             =======

   Diluted
     Continuing operations                     ($1.77)              $0.78              $1.80               $1.09
     Discontinued operations                        -                0.01                  -                0.04
                                             --------             -------            -------             -------   
     Net income (loss)                         ($1.77)              $0.79             ($1.80)              $1.13
                                             ========             =======            =======             =======


See accompanying notes to consolidated financial statements.

</TABLE>


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

                              ANDERSEN GROUP, INC.
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (unaudited)
                                                                                  Six Months Ended
                                                                      August 31, 1998           August 31, 1997
                                                                      ---------------          ----------------


Cash flows from operating activities:
Net income (loss)                                                        ($3,298)                    $2,378

Adjustments to reconcile net income (loss)to net cash
  provided by (used in) operating activities:
     Depreciation, amortization and accretion                                734                        773
     Deferred income taxes                                                (2,525)                     1,013
     Pension income                                                         (214)                      (146)
     Net losses (gains) from marketable securities
       and investments                                                     5,436                     (3,603)
     Purchases of marketable securities                                   (1,731)                    (1,467)
     Proceeds from sales of marketable securities                            604                          -
     Disposals of property and equipment                                     160                          -

Changes in operating assets and liabilities:
     Accounts and notes receivable                                           915                       (677)
     Inventories                                                           2,738                        (40)
     Prepaid expenses and other assets                                        34                        342
     Accounts payable                                                       (255)                      (263)
     Accrued liabilities and other long-term obligations                     (81)                       445
                                                                          ------                     ------

     Net cash provided by (used in) operating activities                   2,517                     (1,245)
                                                                          ------                     ------

Cash flows from investing activities:
     Purchases of property and equipment, net                             (1,058)                    (1,059)
     Proceeds from sale of subsidiary                                      2,400
                                                                                                          -
     Proceeds from collection of long-term investments, net                    -                      1,274
                                                                          ------                     ------

     Net cash provided by investing activities                             1,342                        215
                                                                          ------                     ------ 

Cash flows from financing activities:
     Principal payments on long-term debt                                    (89)                      (459)
     Issuance (repayment) of short term debt, net                           (813)                     1,103
     Stock options exercised                                                  50                          -
     Purchase of treasury stock                                              (42)                         -
     Preferred dividends paid                                               (208)                         -
     Redemption of preferred stock                                             -                       (160)
                                                                          ------                     ------ 

     Net cash provided by (used in)financing activities                   (1,102)                       484
                                                                          ------                     ------

     Net increase (decrease) in cash and cash equivalents                  2,757                       (546)

     Cash and cash equivalents - beginning of period                       2,516                      3,219
                                                                          ------                     ------

     Cash and cash equivalents - end of period                            $5,273                     $2,673
                                                                          ======                     ======


   See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>


ANDERSEN GROUP, INC.

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,  1998.  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

Marketable securities consisted of the following (in thousands):
<TABLE>
<S><C>                                           <C>                               <C>  

                                                    August 31, 1998                February 28, 1998
                                                    ---------------                -----------------
Common stock of savings banks                            $4,968                           $5,611
Common stock of Centennial Cellular                           -                              430
C A Emerging Russia Fund                                    294                            2,422
Portfolio of Ukraine stocks                                 206                              314
Common stock of Bank Handlowy (Poland)                      242                              348
Renaissance Russian Bond Fund                               201                                -
Valuation reserve - foreign investments                     (90)                            (617)
Municipal bonds                                             480                              493
                                                          -----                           ------
                                                         $6,301                           $9,001
                                                         ======                           ======
</TABLE>

     At August 31, 1998,  the  valuation  reserve was  established  only for the
investments in Ukraine and Poland.  The  investments in Russia were written down
to 10% of  original  cost to  reflect  approximate  market  value due to lack of
published quotes. 

(3) Inventories

Inventories consisted of the following (in thousands):
<TABLE>
<S><C>                                          <C>                               <C>
                                                 August 31, 1998                   February 28, 1998
                                                 ---------------                   -----------------
Raw material                                          $1,759                            $ 2,989
Work in process                                        3,784                              6,509
Finished goods                                         2,243                                657
                                                      ------                            -------
                                                       7,786                             10,155
LIFO Reserve                                           2,448                              2,079
                                                      ------                            -------
                                                     $ 5,338                            $ 8,076
                                                     =======                            =======
</TABLE>

 (4)      Discontinued Operations

         Effective  February  28,  1998,  the Company sold the net assets of Ney
Ultrasonics Inc., and recorded a net gain of $97,000 after income taxes.  During
the quarter ended May 31, 1998, the Company received  $2,400,000 of the purchase
price and an  additional  $500,000 was being held by an escrow  agent  pending a
review of the year-end  financial  information and  finalization of the purchase
price.  While this process has not yet been  completed,  the Company  expects to
receive less consideration from the sale than originally estimated. However, the
estimate  of the net gain on sale has not  changed  because,  in the  opinion of
management,  accruals made at the Company's  fiscal year end will be adequate to
cover the change in condition.



<PAGE>


(5)      Income Taxes

         Income tax expense (benefit)  represents an estimate of the effective
income tax rates.


(6)      Dividends

     During February 1998 the Company  amended its certificate of  incorporation
to modify the terms of the Company's Series A Preferred Stock (Preferred  Stock)
to provide for an annual  fixed  dividend  rate of $1.50 per share of  Preferred
Stock, paid quarterly, and to eliminate its mandatory redemption feature.

(7)      Earnings Per Share

     Earnings per share is computed  based upon the weighted  average  number of
common  shares  outstanding  during the period.  Diluted  earnings  per share is
computed based upon the weighted  average  number of common shares  outstanding,
plus  the  assumed  issuance  of  common  shares  for all  potentially  dilutive
securities at the later of the beginning of the year or date of issuance, unless
antidilutive.  For the three and six month  periods  ended August 31, 1998,  the
effect of such conversions were antidilutive.

(8)       Stockholders' Equity

     On  June  23,  1998  the   Company's   stockholders   approved  a  plan  of
reincorporation  in which the Company was merged  into a  wholly-owned  Delaware
subsidiary to effect a change in the Company's state of  incorporation.  As a
result,  the  common  stock of the  Company  now has a par  value  of $.01,  and
appropriate  adjustments  have been made to common stock and additional  paid-in
capital on the accompanying Consolidated Balance Sheet.


(9)      Business Segments and Export Sales

     During the six months ended August 31,  1998,  the Company  operated in two
continuing  segments,  Electronics,  which comprises the operations of J.M. Ney,
and  Corporate,  which  includes  the  Company's  investment,  real  estate  and
corporate  administrative  activities.  Operating  income (loss) consists of net
sales, investment and other income, less cost of sales and selling,  general and
administrative  expenses directly allocated to the industry segments.  Corporate
revenues consist of investment and other income not attributable to J.M. Ney.

Summarized  financial  information  for  business  segments  is as  follows  (in
thousands):
<TABLE>
<S><C>                                                 <C>                        <C>
Six months ended:                                      August 31, 1998             August 31, 1997
                                                       ---------------             ---------------

Revenues:
  Electronics                                              $ 13,536                    $11,671
  Corporate                                                  (4,589)                     4,013
                                                          ---------                    -------
                                                           $  8,947                    $15,684
                                                          ---------                    -------
Operating income (loss):
  Electronics                                               $   938                    $ 1,413
  Corporate                                                  (5,411)                     2,922
                                                          ---------                    -------
                                                           ($ 4,473)                   $ 4,335
                                                          ---------                    -------
Interest expense:
  Electronics                                                 $ 727                      $ 138
  Corporate                                                     259                        351
                                                            -------                    -------       
                                                              $ 986                      $ 489
                                                            -------                    -------
Depreciation, amortization and accretion: 
  Electronics                                                 $ 655                       $647
  Ultrasonics                                                     -                         33
  Corporate                                                      79                         93
                                                            -------                    -------       
                                                              $ 734                      $ 773
                                                            -------                    -------
Capital expenditures:
  Electronics                                               $ 1,047                     $1,025
  Ultrasonics                                                     -                         25 
  Corporate                                                      11                          9
                                                            -------                     ------
                                                            $ 1,058                     $1,059
                                                            -------                     ------



<PAGE>



As of:                                                 August 31, 1998            February 28, 1998
                                                       ---------------            -----------------
Identifiable assets:
  Electronics                                              $25,077                     $25,337
  Corporate                                                 12,535                      19,434
                                                           -------                     -------
                                                           $37,612                     $44,771
                                                           -------                     -------
</TABLE>

Export sales for the six months  ended August 31, 1998 and 1997 were  $2,225,000
and  $2,161,000,  respectively.  Such sales were made  primarily to customers in
Europe and the Pacific Rim.

During the six months ended August 31, 1998,  sales to two  customers  accounted
for 13% and 12% of net sales, respectively.


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

For the three  months ended  August 31,  1998,  the Company  recorded a net loss
applicable to common  shareholders of $3,447,000,  or $1.77 per share, basic and
diluted. During the prior fiscal year's second quarter, the Company recorded net
income applicable to common shareholders of $2,040,000, or $1.05 basic and $0.79
diluted. Such prior year results include $23,000 of net income from discontinued
operations.

For the six  months  ended  August 31,  1998,  the  Company  recorded a net loss
applicable to common  shareholders of $3,497,000,  or $1.80 per share, basic and
diluted.  This compares with net income  applicable  to common  shareholders  of
$2,181,000,  or $1.13 basic and diluted, for the six months ended August
31,  1997.   Such  prior  year  results  include  $73,000  of  net  income  from
discontinued operations.

REVENUES
Revenues for the three  months  ended  August 31, 1998 totaled  $1,116,000,
comprised of $5,938,000 of net sales from The J.M. Ney Company (J.M.  Ney) and
a net loss of $4,822,000 from  investments and other income.  For the six months
ended August 31,  1998,  revenues  totaled  $8,947,000,  which was  comprised of
$13,623,000  of net sales  from  J.M.  Ney and  $4,676,000  of net  losses  from
investments and other income.

Sales  generated  by  J.M.  Ney,  the  Company's  wholly-owned  manufacturer  of
electronic  materials  and  components,  increased by 5.7% over the prior fiscal
year's second quarter due to higher selling prices for palladium-based  products
and increased sales of materials made from precious metal alloys. Sales of parts
were adversely  impacted by the reduced  demand from the automotive  market as a
result of the labor strike against General Motors.

For the six months ended  August 31,  1998,  sales were 16.8% ahead of last year
primarily due to the increased  palladium prices and increased material sales to
various customers.

Investment and other income produced a net loss of $4,822,000 during the quarter
ended  August 31,  1998 and a net loss of  $4,676,000  for the six  months  then
ended.  Significant  components  of this six month  net loss and the  comparable
income  recognized  during the first six months of the prior fiscal year were as
follows (in thousands):

<TABLE>
<S><C>                                                           <C>                           <C>
                                                                                Six months ended
                                                                   August 31, 1998             August 31, 1997
                                                                   ---------------             ---------------
Net gains (losses) from domestic investment portfolio                 $(1,712)                      $  796
Net (losses) gains from Russian and Eastern European 
   portfolio and longer-term investments                               (3,722)                       2,645
Interest and dividends                                                    190                          105
Rental income                                                             267                          216
Other, net                                                                301                          256
                                                                     --------                     --------

                                                                      $(4,676)                      $4,018
                                                                      -------                       ------
</TABLE>

During the quarter ended August 31, 1998,  Russian equity  investments  for
which a market  quote was not  available  were  written  down to 10% of original
cost,  which  represents  management's  estimate of the net realizable  value of
those  investments.  This also includes the Company's  longer-term
investments in the Institute for Automated Systems, a Russian telecommunications
company,  and  VSMPO,  a  Russian  titanium  producer.  Other  Eastern  European
investments have valuation reserves equal to 20% of quoted market to provide for
volatility and liquidity concerns. In addition, a Russian income fund investment
has been marked down  approximately  60% based on information  received from the
portfolio managers.

COST OF SALES
Cost of sales for the three months ended August 31, 1998 represented  64.9%
of sales,  versus  cost of  sales,  which  were  equal to 65.5% of sales for the
second quarter of the prior fiscal year. Year-to-date, cost of sales is 66.2% of
net sales, versus the prior fiscal year in which cost of sales represented 65.6%
of net sales during the first six months. More effective market pricing of sales
of palladium-based  products in the current year along with increased volumes of
refining activity have contributed to improved margins. However, increased sales
mix of material  sales and lower  absorption of operating  costs  resultant from
reduced  production of parts for sale into the  automotive  market in the second
quarter served to lower margins.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling,  general and  administrative  expenses  for the three months ended
August 31, 1998 totaled  $1,822,000,  which is a 15.8%  increase  from the prior
fiscal year's second  quarter  expense total of $1,574,000.  Year-to-date,  such
costs totaling  $3,446,000  represent a 14.4% increase over the prior year's six
months  expenses of  $3,012,000.  Costs  incurred in  connection  with  computer
systems  enhancements to position the Company to be Year 2000 compliant totaling
approximately  $273,000 have  contributed to the increase,  along with increased
personnel recruiting costs.

RESEARCH AND DEVELOPMENT EXPENSES
Research  and  development  expenses  for the three months ended August 31, 1998
totaled $465,000,  or 7.8% of net sales, versus $336,000,  or 6.0% of net sales,
in the prior  fiscal  year's  second  quarter.  Year-to-date,  these  costs have
increased by 39.8% and represent 7.0% of sales versus 5.8% of sales in the first
six months of the prior  fiscal  year.  The  absolute  increase was due to lower
allocations  to cost of  sales  of  portions  of these  costs  and to  increased
engineering  and research  activities.  The increase  relative to sales was also
caused by lower than planned sales caused by the labor dispute  against  General
Motors.

INTEREST EXPENSE
For the three  months  ended  August 31,  1998,  interest  expense  totaled
$525,000, or a 101.1% increase over the prior fiscal year's second quarter total
of $261,000.  Year-to-date  through August 31, 1998,  interest  expense  totaled
$986,000,  or 101.6% more than interest  incurred during the prior fiscal year's
first six  months.  Most of the  increase is from  interest  on $7.5  million of
subordinated  debt, which J.M. Ney obtained in December 1997. In addition,  high
interest rate  palladium  leases have added to the interest  expense.  Corporate
level interest  expense is lower in the current year due to repayment of debt in
February 1998 in connection with an exchange of 10 1/2% convertible subordinated
debentures and the repayment of Industrial Revenue Bonds obligation.

INCOME TAX EXPENSE
Income taxes have been accrued based on estimated effective income tax rates.

PREFERRED DIVIDENDS
     For the three and six months ended August 31, 1998,  dividends were accrued
based upon the revised terms,  which provide for quarterly payments of dividends
at the annual rate of $1.50 per share.  For the  comparable  three and six month
periods in the prior fiscal year,  dividends were accrued at the rate of $0.2955
and $0.7330,  respectively  per preferred  share in accordance  with the prior
terms of this security.

During the second quarter of the prior fiscal year, the Company  purchased 8,744
shares of its preferred stock,  which resulted in the reversal of accrued unpaid
dividends and accreted discounts of $37,000.

LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1998, the Company's  consolidated  cash and marketable  securities
was approximately  $11.6 million,  which is a modest increase from $11.5 million
at  February  28,  1998.  Of these  amounts,  $4.1  million  and  $1.1  million,
respectively were held in the accounts of J.M. Ney, while the Company's cash and
short-term  investments at August 31, 1998 totaled $7.5 million,  a $2.9 million
decline  from  February  28,  1998  levels.   J.M.  Ney's  cash  and  short-term
investments  increased  primarily from lower  accounts  receivable and inventory
balances,  while the decrease in the Company's cash and  short-term  investments
reflects declines in the values of its domestic and Russia trading portfolio. At
August 31, 1998, 29.7% of the Company's  consolidated  stockholder's  equity was
invested  in  the  common  stock  of  financial  institutions,   while  6.3%  of
consolidated  stockholder's equity was invested in both short-term and long-term
investments in Russia, Ukraine and Poland,  including a J.M. Ney investment in a
Russian income fund with a reported value of $201,000.

As a result of  covenants  contained  in its  borrowing  agreement,  J.M. Ney is
restricted from paying dividends or otherwise  transferring funds to the Company
outside the ordinary course of business, except as defined in certain covenants.
At August 31, 1998, J.M. Ney's working capital and net worth (net of liabilities
to  the   Company)   totaled   approximately   $9.1  million  and  $7.0  million
respectively.

The Company is required to make sinking fund payments on its 10 1/2%  debentures
and  has  interest,   preferred   dividend  and  operating   expense  cash  flow
requirements.  The  Company  anticipates  that these  working  capital  and debt
service  requirements will be met from the liquidation or additional  leveraging
of investments and from permitted payments from J.M. Ney.

DISCLOSURE OF YEAR 2000 ISSUES
The "Year 2000 problem" arose because many existing  computer  programs use only
the last two digits to refer to a year. This does not allow programs to properly
recognize  a year that  begins with "20"  instead of "19",  and could  result in
program failures or erroneous results.

     The Company and J.M. Ney have evaluated all known exposures to applications
with embedded chips,  including those that are  informational and operational in
nature,  which do not properly recognize all four digits of dates. To date, most
of the financial  and  operational  effort has been  expended in upgrading  J.M.
Ney's enterprise  resource  planning (ERP) system,  which is used to control its
operational  activities  from order entry  through  manufacturing  to  financial
reporting.  Prior to the current  fiscal year,  approximately  $128,000 had been
expended on this project while  identifiable  costs expended  during the current
fiscal year totals $273,000. An additional $75,000-$100,000 is anticipated to be
expensed on this phase of the Year 2000 preparedness project,  which is expected
to be completed prior to December 31, 1998. As of the date of this filing,  this
major project is substantially complete. Additional applications,  which require
modification or replacement to ensure Year 2000 compliance have been identified,
and are  planned to be  completed  by no later than May 31,  1998.  The cost of
these additional upgrades is estimated to total approximately $200,000.

     Based upon a comprehensive  review of exposure areas,  which included among
other steps, analyses of the Company's and J.M. Ney's interdependence on outside
computer  applications from vendors and customers,  the Company and J.M. Ney are
confident that manufacturing and other operational and administrative activities
will not be at significant risk due to the Year 2000 problem, as long as outside
sources of power and communications remain operational.

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.  Among the risk and  uncertainty  are the performance of the world's
equity  markets,  principally  the U.S.  stock  market,  precious  metal prices,
general  economic  conditions  and the  degree of  success  of  identifying  all
critical Year 2000 exposures.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

         Not required.




<PAGE>


Part II.  Other Information

Item 1.  Legal Proceedings

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

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

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

     James S.  Cathers and Sylvia Jean  Cathers,  his wife v. Kerr  Corporation,
Whip-Mix Corporation, The J.M. Ney Company and Dentsply Corporation, Inc.

As originally reported in the Company's  Form 10-Q for the Quarter ended August
31, 1997,  in August  1997,  J.M. 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,  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 at an unspecified  location
in  Pittsburgh,  Pennsylvania.  The  Plaintiffs  allege  that this  exposure  to
asbestos  and  asbestos  products  caused  the  wrongful  death  of  one  of the
Plaintiffs  from cancer  (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 has determined  that it has insurance that  potentially  covers this
claim and has called upon the  insurance  carriers to provide  reimbursement  of
defense costs and liability,  should any arise. 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.  The Company intends to vigorously  defend the
lawsuit.

     Anthony  Nicholas  Georgiou,  et  al v.  Mobil  Exploration  and  Producing
Services, Inc., Metromedia International Telecommunications, Inc., et al.

     On January 14, 1998, Anthony Nicholas Georgiou, et al. v. Mobil Exploration
and Producing Services, Inc., Metromedia International Telecommunications, Inc.,
et al., was filed in the United States District Court for the Southern  District
of Texas.  Plaintiffs  claim that the  defendants,  including the Registrant and
Oliver R. Grace,  Jr. the  Registrant's  President and Chief Executive  Officer,
interfered  with  plaintiffs'  business  relationships  with  several  companies
involving  certain  oil  exploration  and  production  contracts  in Siberia and
telecommunications contracts in the Russian Federation.

     On August 27, 1998, the United States  District court granted the Company's
motion to dismiss this case for lack of personal jurisdiction.

Item 4.  Submission of Matters to a Vote of Security Holders.

Votes of security  holders held on June 23, 1998 have been previously
reported in the Company's Form 10-Q for the quarter ended as of May 31, 1998.

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

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

     Exhibit               Description

     Exhibit 27            Financial Data Schedule.

     Exhibit 27.1          Restated Financial Data Schedule Six Months Ended
                           Ended August 31, 1997.

No reports on Form 8-K were filed during the quarter ended August 31, 1998.


<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:    October 13, 1998



By:      /s/ Andrew M. O'Shea
         Andrew M. O'Shea
         Chief Financial Officer
         The J.M. Ney Company
         (Principal Financial Officer of the Company)

Date:    October 13, 1998