<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended FEBRUARY 28, 1999..................

                                      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 1-10860.................................................

                             THE NAHDREE GROUP, LTD.
               ...................................................
             (Exact name of registrant as specified in its charter)

         DELAWARE                                          13-3615898
 ...............................                    ............................
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                           Identification No.)

                    530 SEVENTH AVENUE NEW YORK, NEW YORK
                                     10018
      ....................................................
                   (Address of principal executive offices)
                                  (Zip Code)

                                  (212)947-9000
              ....................................................
              (Registrant's telephone number, including area code)

              ....................................................
              (Former name, former address and former fiscal year,
                          if changed since last report)

      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 



                                      - 1 -
<PAGE>   2
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.........

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

      Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes.........   No.........

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

            The number of shares of registrant's Common Stock, outstanding as of
April 14, 1999, is 11,995,238 shares.


                                      - 2 -
<PAGE>   3
                    THE NAHDREE GROUP, LTD. AND SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                       PAGE NO.
<S>                                                                  <C>
      ITEM 1.     FINANCIAL STATEMENTS (UNAUDITED):

                  Condensed Consolidated Balance Sheets
                  February 28, 1999, and May 31, 1998.....               4

                  Condensed Consolidated Statements of 
                  Operations Three and Nine Months Ended 
                  February 28, 1999 and 1998..............               5

                  Condensed Consolidated Statements of 
                  Cash Flows Nine Months Ended February 
                  28, 1999 and 1998.......................               6

                  Condensed Notes to Consolidated
                  Financial Statements....................               7

      ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS
                  OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS..............................               9

PART II - OTHER INFORMATION...............................              15
</TABLE>


                                      - 3 -
<PAGE>   4
                        PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
                   THE NAHDREE GROUP, LTD. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In thousands)

<TABLE>
<CAPTION>
                                                       February 28,       May 31,
                                                          1999             1998
                                                      (UNAUDITED)
<S>                                                   <C>               <C>
                          ASSETS
Current Assets:
  Cash .........................................        $      0         $     93         
                                                        --------         --------
Accounts receivable:
   Trade-net ...................................           1,958              497
   Suppliers and other .........................           1,772            1,649
                                                        --------         --------
                                                           3,730            2,146
  Inventory ....................................          14,431           13,781
  Other current assets .........................             252              200
                                                        --------         --------
       Total current assets ....................          18,413           16,220
                                                        --------         --------
Fixed assets - at cost, net of accumulated
  depreciation and amortization ................           1,040            1,173
Intangibles ....................................          10,079           10,933


 Other assets ..................................           1,045            1,053
                                                        --------         --------
                                                        $ 30,577         $ 29,379
                                                        ========         ========
       LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Cash Overdraft ...............................        $    369         $    614
  Due to factor ................................           9,050            6,883
  Accounts payable .............................           6,198            5,857
  Current portion of capital lease obligation ..              20               20
  Accrued expenses and other current
    liabilities ................................           1,686            1,209
  Due to affiliate .............................           2,151            2,151
                                                        --------         --------
       Total current liabilities ...............          19,474           16,734
                                                        --------         --------
Long-term debt--stockholder--Subordinated ......           9,691            9,691
Long-Term portion of capital lease obligation ..              32               45
                                                        --------         --------
                                                           9,723            9,736
                                                        --------         --------
Commitments and contingencies
Stockholders' equity:
    Preferred stock, $.01 par value; 1,000,000
       authorized shares; no shares outstanding               --               --
    Common stock, $.01 par value; 25,000,000
       authorized shares; issued and outstanding
       11,995,238 shares .......................             120              120
    Additional paid-in capital .................           2,867            2,867
    Accumulated deficit ........................          (1,607)             (78)
                                                        --------         --------
    Total stockholders' equity .................           1,380            2,909
                                                        --------         --------
    Total liabilities and stockholders' equity .        $ 30,577         $ 29,379
                                                        ========         ========
</TABLE>

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


                                      - 4 -
<PAGE>   5
                    THE NAHDREE GROUP, LTD. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED                      NINE MONTHS ENDED
                                        FEBRUARY 28,         FEBRUARY 28,         FEBRUARY 28,        FEBRUARY 28,
                                           1999                 1998                 1999                 1998
                                         --------             --------             --------             -------
<S>                                    <C>                   <C>                 <C>                  <C>
Net Sales ...................            $ 11,275             $ 10,736             $ 34,648             $ 21,339
Cost of sales ...............               7,138                7,648               22,645               15,767
                                         --------             --------             --------             --------
Gross profit ................               4,137                3,088               12,003                5,572 
Selling, general and
administrative expenses .....               3,361                3,033               11,579                5,324       
Amortization of goodwill ....                 285                  190                  854                  190
                                         --------             --------             --------             --------
Operating income/(loss) .....                 491                 (135)                (430)                  58
                                         --------             --------             --------             --------
Other income (expense) 
 Interest expense ...........                (621)                (421)              (2,049)                (642)
 Insurance settlement .......                 950                   --                  950                   --          
                                         --------             --------             --------             --------
Income (loss) before 
provision for income taxes ..                 820                 (556)              (1,529)                (584)

Provision for income
taxes .......................                  --                   --                   --                  149
                                         --------             --------             --------             --------
Net income  (loss) ..........            $    820             $   (556)            $ (1,529)            $   (733)
                                         ========             ========             ========             ========
Basic and diluted gain (loss)
 per share ..................            $   0.07             $  (0.05)            $  (0.13)            $  (0.11)
                                         ========             ========             ========             ========
Weighted average shares
outstanding .................              11,995               10,279               11,995                6,926
                                         ========             ========             ========             ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.


                                      - 5 -
<PAGE>   6
                    THE NAHDREE GROUP, LTD. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                 (UNAUDITED)

<TABLE>
<CAPTION>                                                            
                                                          NINE MONTHS ENDED    NINE  MONTHS ENDED
                                                          FEBRUARY 28, 1999    FEBRUARY 28, 1998
                                                          -----------------    -----------------
<S>                                                             <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss .........................................            $(1,529)            $  (733)
                                                                -------             -------
  Adjustments to reconcile net loss to net cash (used
    in) provided by operating activities:
    Depreciation and amortization ..................              1,151                 354
    Deferred income taxes ..........................                 --                 143
(Increase) decrease in assets:
  Trade receivables ................................             (1,461)              2,710
  Other receivables ................................               (123)               (145)
  Due to factor ....................................                 --               6,380
  Inventories ......................................               (650)             (1,407)
  Other current assets .............................                (52)                 17
  Other assets .....................................                  8                (263)

Increase (decrease) in liabilities:
  Accounts payable .................................                341               1,779
  Accrued expenses and other current liabilities ...                477                (338)
                                                                -------             -------
  Total adjustments ................................               (309)              9,230
                                                                -------             -------
Net cash (used in)  provided by
 operating activities ..............................             (1,838)              8,497
                                                                -------             -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of fixed assets ......................               (164)               (538)
                                                                -------             -------
Net cash used in investing activities ..............               (164)               (538)
CASH FLOWS FROM FINANCING ACTIVITIES:
  (Repayment) advance of cash overdraft ............               (245)                320
  Increase (decrease) in bank loans ................              2,167              (8,148)
  Repayment of equipment lease .....................                (13)                (10)
                                                                -------             -------
    Net cash provided by (used in)
    financing activities ...........................              1,905              (7,838)
NET (DECREASE) INCREASE IN CASH ....................                (93)                121
                                                                -------             -------
CASH, beginning of period ..........................                 93                   0
                                                                -------             -------
CASH, end of period ................................            $     0             $   121
                                                                =======             =======
</TABLE>


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




                                      - 6 -
<PAGE>   7
                    THE NAHDREE GROUP, LTD. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                February 28, 1999

1.    BASIS OF PRESENTATION

      The condensed consolidated financial statements include the accounts of
      The Nahdree Group, Ltd. and its subsidiaries (hereinafter collectively
      referred to as the "Company" unless the context clearly otherwise
      requires). The consolidated financial statements are presented in
      accordance with the requirements of the quarterly report on Form 10-Q and
      consequently do not include all of the disclosures normally made in an
      annual report on Form 10-K filing. Accordingly, the consolidated financial
      statements included herein should be reviewed in conjunction with the
      consolidated financial statements and the notes included therein with the
      Company's Annual Report on Form 10-K for the fiscal year ended May 31,
      1998.

      The financial information as of and for the three months and nine months
      ended February 28, 1999 and 1998, has been prepared in accordance with the
      Company's customary accounting practices and has not been audited.
      In the opinion of management, the information presented reflects all 
      adjustments necessary for a fair presentation of interim results. All 
      such adjustments are of a normal and recurring nature. The foregoing 
      interim results are not necessarily indicative of the results of 
      operations for the full year ending May 31, 1999.


2.    ACQUISITION

      On December 24, 1997, the Company purchased all of the outstanding capital
      stock of Nah Nah Collection, Inc. ("Nah Nah"). The transaction has been
      accounted for as a reverse acquisition. Accordingly, the accompanying
      financial statements present the unaudited consolidated historical results
      of operations of The Nahdree Group, Ltd. (which includes Nah Nah) for the
      three months and nine months ended February 28, 1999, and 1998.


3.    USE OF ESTIMATES

      Generally accepted accounting principles require management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent gains and losses at the date of
      the financial statements and the reported amounts of revenues and expenses
      during the period. Actual results could differ from those estimates.


4.    NEW ACCOUNTING PRONOUNCEMENTS

      In 1998, the Accounting Standards Executive Committee of the American
      Institute of Certified Public Accountants issued Statement of Position
      98-1 (SOP 98-1), "Accounting for the Costs of Computer Software Developed
      or Obtained for Internal Use". This statement, which becomes effective
      in 1999, requires that certain costs of developing or obtaining software
      for internal use be capitalized. The Company does not expect the
      statement to have a material effect on the Company's financial position,
      results of operations or cash flows.
 
      In 1998, the AICPA issued Statement of Position 98-5 (SOP 98-5) "Reporting
      on the Costs of Start-up Activities". Pursuant to the provision of SOP
      98-5, all costs associated with the start-up activities, including
      organization costs, should be expensed as incurred. Companies that
      previously capitalized such costs are required to write-off the
      unamortized portion of such costs as cumulative effect of a change of
      accounting principle. The adoption of SOP 98-5 will not have a significant
      impact on the Company's financial statements.

5.    EARNINGS (LOSS) PER SHARE

      Basic earnings (loss) per share excludes dilution and is computed by
      dividing earnings (loss) available to common shareholders by the weighted
      average number of common shares outstanding for the period.


                                      - 7 -
<PAGE>   8
      Diluted earnings (loss) per share is computed by dividing earnings (loss)
      available to common shareholders by the weighted average number of common
      shares outstanding for the period, adjusted to reflect potentially
      dilutive securities. Options and warrants were not included in the
      computation of diluted earnings (loss) per share because the exercise
      price was greater then the market price of the stock.


6.    INVENTORY

      Inventory is stated at the lower of cost (first-in, first-out) or market,
      and at February 28, 1999, a majority of the inventory was calculated using
      the gross profit method. 

<TABLE>
<CAPTION>
                                                          (In Thousands)
                                                    February 28,        May 31,
                                                        1999             1998
                                                      --------         --------
                                                    (UNAUDITED)
<S>                                                 <C>                <C>
      Finished goods.....................             $ 11,358         $ 11,470

      Raw materials and work in process                  3,073            2,311
                                                      --------         --------
                                                      $ 14,431         $ 13,781
                                                      ========         ========
</TABLE>

7.    SUPPLEMENTAL CASH FLOW INFORMATION

      Payments of income taxes were $9,265 and $8,000 for the nine months ended
      February 28, 1999 and 1998, respectively. Payments of interest during the
      corresponding periods were $1,278,062 and $445,000 respectively.


                                      - 8 -
<PAGE>   9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.


GENERAL

            The following discussion provides information and analysis of the
results of operations for the three-month and nine-month periods ended February
28, 1999, of The Nahdree Group, Ltd. and its subsidiaries (collectively, the
"Company"). The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto included else where herein.

            On December 24, 1997, The He-Ro Group, Ltd. ("He-Ro") acquired (the
"Acquisition") all the outstanding capital stock of Nah Nah Collection, Inc.
("Nah Nah"), from Hong J. Han, President and sole shareholder of Nah Nah, in
exchange for the issuance by He-Ro to Mr. Han of 5,277,905 shares of Common
Stock (equivalent to 44% of the combined entities' issued and outstanding
capital stock). In addition, Della Rounick, the principal shareholder of He-Ro,
granted to Mr. Han an irrevocable proxy to vote the 4,430,748 shares of Common
Stock owned by her, giving Mr. Han the voting control over a total of 80.9% of
the Company's issued and outstanding Common Stock. Such Acquisition was
accounted for as a "reverse acquisition". The He-Ro Group, Ltd. subsequently
changed its name to The Nahdree Group, Ltd., effective May 31, 1998.

            Since the beginning of the fiscal-year ending May 31, 1999, the
Company has been implementing cost-cutting measures in order to reduce the
Company's cost of operations and increase profitability. To such end, the
Company has (i) closed ten out of 25 of its retail stores, and reduced the size
of several other of its stores, (ii) eliminated overlapping functions of He-Ro
and Nah Nah, thereby decreasing the size of the Company's workforce from
approximately 300 employees to 212, and (iii) shut down its NNP private label,
Nahdree Lifestyle and Constance Saunders by Nahdree (after the end of the
three-month period ended February 28, 1999, See "Item 5. Other Information"
below) divisions due to unprofitablity. Such cost-cutting measures and a
non-recurring receipt of $950,000 of insurance proceeds (See "Results of
Operations" below) have improved the Company's operating results during the
three-month period ended February 28, 1999. 
                                                                               
            The Company's principal selling seasons are the Spring and Fall
seasons. The Company's Spring season begins in December and ends in May, and the
Fall season begins in June and ends in November. Products sold under the
Company's NiteLine and Black Tie by Oleg Cassini labels have historically


                                      - 9 -
<PAGE>   10
achieved higher sales in the Fall season while products under the Company's Nah
Nah Collection and Victor Costa by Nahdree labels have achieved higher sales in
the Spring.                       

LIQUIDITY AND CAPITAL RESOURCES

            The Company receives financing from Heller Financial, Inc.
("Heller"), pursuant to a Factoring and Revolving Inventory Loan and Security
Agreement dated December 24, 1997, as amended as of May 31, 1998 (the "Heller
Agreement"). The Heller Agreement provides that Heller will (i) purchase up to
85% of the amount of eligible receivables, (ii) in its discretion make
revolving loans, secured by a lien on assets, upon request in amounts up to
approximately 60% of eligible finished goods inventory located in the United
States, plus certain supplemental amounts (over-advances), and (iii) arrange
for the issuance of letters of credit secured by funds available to the
Company, provided that the amount of the loans and letters of credit
outstanding at any time may not exceed $20,000,000 in the aggregate. The Heller
Agreement contains certain financial covenants, including that the Company's
(i) Tangible Net Worth shall not be less than $2.3 million at the end of each
Fiscal Quarter during the Fiscal Year ending May 31, 1999, and increasing
amounts thereafter, (ii) Working Capital shall not be less than negative
$515,000 at the end of any Fiscal Quarter, (iii) Current Ratio shall not be
less than 1.30 to 1.00 at the end of any Fiscal Quarter, and (iv) Capital
Expenditures shall not exceed $450,000 in a Fiscal Year. At the end of the
Fiscal Quarter ending February 28, 1999, such amounts (as defined in the Heller
Agreement, dollar amounts in thousands) were: Tangible Net Worth: $2,345,
Working Capital: $1,090, Current Ratio: 1.77 to 1.00, and Capital Expenditures
during 1999: $164. Accordingly, the Company is in compliance with each of the
foregoing covenants.
            
           For the three-month period ended February 28, 1999, the Company
realized income from operations of $491,000, before interest expense of
$621,000 and a non-recurring insurance recovery of $950,000, resulting in net
income of $820,000.  For the nine-month period ended February 28, 1999, the
Company incurred a loss from operations of $430,000, before interest expense of
$2.049 million and a non-recurring insurance recovery of $950,000, resulting in
net loss of $1.529 million.  The aforesaid operating results have resulted in
an increase in Tangible Net Worth to the level indicated in the preceding
paragraph, bringing the Company into compliance with the financial covenants in
the Heller Agreement.  However, there is no assurance that net losses will not
recur or that the Company's Tangible Net Worth will continue to increase, even
though the current trend in operating results suggests that such growth is
likely to continue.


                                     - 10 -
<PAGE>   11
            In the event that the Company should realize continued losses and
cease to be in compliance with the financial covenants in the Heller Agreement,
Heller might not be willing to extend or increase the level of over-advances
(or make other accommodations), although Heller has from time to time extended
seasonal and operational over-advances to the Company in the past, and the
Company might not be able to generate adequate liquidity through other means.
The Company's management believes, however, that as a result of the cost
reduction measures it has taken to improve the Company's operating results (see
"General" above), it will be able either to maintain compliance with the
aforesaid covenants or find other sources for needed liquidity.  


CHANGES IN FINANCIAL CONDITIONS

            A comparison of the balance sheet of the Company as at February 28,
1999, with its balance sheet as at May 31, 1998, indicates that (i) total assets
were $30.6 million at February 28, 1999, compared to $29.4 million at May 31,
1998, and (ii) working capital was negative $1.1 million at February 28, 1999,
as compared with negative $0.5 million at May 31, 1998. This decrease in working
capital is a result of an increase in the amount of overadvances to the Company
from Heller during the nine-month period ended February 28, 1999.


RESULTS OF OPERATIONS

            EXPLANATORY NOTE: The results of operations for the historical
            three-month and nine-month periods ended February 28, 1998, which
            are presented for comparative purposes, are presented as if the
            Acquisition had taken place on June 1, 1997.

            THREE MONTHS ENDED FEBRUARY 28, 1999, COMPARED TO THREE MONTHS ENDED
FEBRUARY 28, 1998.

            The Company's net income was $0.8 million for the three-month period
ended February 28, 1999, compared to a loss of $1.3 million for the three-month
period ended February 28, 1998. Such increase in net income is a result of the
factors discussed below.

            The net sales for the three-month period ended February 28, 1999,
were $11.3 million compared to $12.3 million for the three-month period ended
February 28, 1998. The decrease in net sales is attributable to (i) the closing


                                     - 11 -
<PAGE>   12
of ten out of 25 of the Company's retail stores and (ii) the shut down of the
Company's NNP private label and Nahdree Lifestyle divisions.

            The cost of sales from operations for the three-month period ended
February 28, 1999, was $7.1 million (62.8% of net sales) compared to $8.9
million (72.3%) for the three-month period ended February 28, 1998. The decrease
in the ratio of cost of sales to net sales is attributable to the shut down of
the Company's NNP private label and Nahdree Lifestyle divisions. As a result,
the Company's gross profit for the three-month period ended February 28, 1999,
was increased to $4.1 million (37.2%), compared with $3.4 million (27.6%) for
the three-month period ended February 28, 1998.

            Selling, general and administrative expenses for the three-month
period ended February 28, 1999, were $3.4 million (30.1%) compared to $3.9
million (31.7%) for the three-month period ended February 28, 1998. Such
decrease in selling, general and administrative expenses is attributable to the
reduction in size of the Company's workforce as discussed in General above.

            In addition to the factors discussed above, the Company received
other income of $950,000 during the three-month period ended February 28, 1999.
Such other income represents insurance proceeds received in settlement of an
insurance claim by the Company arising out of a fire in the Company's public
warehouse in Secaucus, New Jersey on December 9, 1998.

            NINE MONTHS ENDED FEBRUARY 28, 1999, COMPARED TO NINE MONTHS ENDED
FEBRUARY 28, 1998.

            The Company's net loss for the nine-month period ended February 28,
1999, was $1.5 million, as compared with $3.1 million for the nine-month period
ended February 28, 1998. Such improvement in operating results is a result of
the factors discussed below.

            Net sales for the nine-month period ended February 28, 1999, were
$34.6 million as compared to $43.7 million for the nine-month period ended
February 28, 1998. The decrease in net sales is attributable to (i) the closing
of ten out of 25 of the Company's retail stores and (ii) the shut down of the
Company's NNP private label and Nahdree Lifestyle divisions.

            The cost of sales from operations for the nine-month period ended
February 28, 1999, were $22.6 million (65.3% of net sales), compared to $30.4
million (69.5%) for the nine-month period ended February 28, 1998. The decrease
in cost of sales as a percentage of net sales is principally attributable 


                                     - 12 -
<PAGE>   13
to the shut down of the Company's NNP private label and Nahdree LifeStyle
divisions. As a result, gross profit for the nine-month period ended February
28, 1999, was $12.0 million (34.7%), compared with $13.3 million (30.4%) for
the comparable period in 1998.

            Selling, general and administrative expenses for the nine-month
period ended February 28, 1999, were $11.6 million (33.5%) compared to $14.1
million (32.3%) for the nine-month period ended February 28, 1998. Such decrease
in selling, general and administrative expenses is attributable to the reduction
in size of the Company's workforce (See "General" above).


YEAR 2000 PROBLEM.

            The Company has retained a consulting firm (the "Consultant") to
implement upgrades to its management information computer systems to deal with
the Year 2000 problem. The Company uses its management information systems to
coordinate and monitor the components of its business and provide its management
with information it needs to make informed decisions. Such systems were designed
to provide the Company with, among other things, comprehensive order processing,
predictions, accounting and management information for the marketing,
manufacturing, importing and distribution functions of the Company's business.

            The Consultant has commenced the renovation of the Company's
software and hardware to rectify Year 2000 problems which it has identified.
Currently, the Consultant is consolidating the He-Ro systems with the Nah Nah
systems in a Year 2000 compliant IBM mainframe. Upon completion of such
consolidation, the Consultant will test such systems to ensure Year 2000
readiness. At present, the Company believes that the foregoing renovations can
be completed (i) within its estimated costs of between $150,000 and $200,000,
and (ii) by its estimated completion date of September 1999, which will enable
such renovations to be fully effective by December 31, 1999.

            There can be no assurance that the renovations described above will
accomplish their objectives or that the aforesaid estimated costs may not
increase as such renovations are made. The Company will expense all such costs
as they are incurred. In order to assess and remedy the Year 2000 problem, the
Company continues to forego certain planned information system projects,
including a hardware upgrade, a custom code upgrade, the installation of a test
system, and a system and integration test.


                                     - 13 -
<PAGE>   14
            The failure to correct the Year 2000 problem could result in an
interruption of certain normal business activities or operations. Such
interruption could have an adverse affect on the Company's results of
operations, liquidity, and financial condition. There is general uncertainty
inherent in the Year 2000 problem, particularly with regards to the effects the
failure of computer systems operated by the Company's suppliers and vendors
might have on the Company's operations.


                                     - 14 -
<PAGE>   15
                           PART II - OTHER INFORMATION


ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

            In December 1997, Mr. Hong J. Han acquired from Mrs. Della Rounick,
subordinated indebtedness of the Company to the Estate of Herbert Rounick (of
which Mrs. Rounick is executrix) in the amount of $5,482,117 (Mrs. Rounick
retained $1,209,064 of such indebtedness). Such debt (i) bears interest at
9.278% per annum payable on the first of each month commencing January 1, 1998,
or otherwise on demand, and (ii) is subordinated to Heller (see "Liquidity and
Capital Resources" above) pursuant to the Subordination Agreement dated December
24, 1997, among Mr. Han, Mrs. Rounick, He-Ro and Heller. The Company has
defaulted on the payment of interest to Mr. Han and Mrs. Rounick on such
indebtedness, and at April 14, 1999, is in arrears in the amount of
$815,245 on the payment of such interest.

            In December 1997, Mr. Han also acquired all of the obligations due
and owing by the Company to its former bank group in the aggregate principal
amount of $2,750,000. These obligations are evidenced by term notes bearing
interest at 2% above the prime rate. Pursuant to the terms of the Subordination
and Intercreditor Agreement dated December 24, 1997, between Heller and Mr. Han,
such indebtedness is subordinated to Heller (see "Liquidity and Capital
Resources" above). The Company has defaulted on the payment of interest to Mr.
Han on such indebtedness, and at April 14, 1999, is in arrears in the amount of
$294,109 on the payment of such interest.


ITEM 5. OTHER INFORMATION.

            The Constance Saunders by Nahdree division was shut down by
management effective March 26, 1999. The closing of such division is part of
management's comprehensive plan to improve the Company's operating results. (See
"General" in Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations above.)


ITEM 6. EXHIBITS AND OTHER REPORTS ON FORM 8-K.

      (a)  Exhibits

      3.1         Restated Certificate of Incorporation of Registrant.
                  Incorporated by reference to Exhibit 3.1 of Registrant's
                  Annual Report on Form 10-K for the fiscal year ended


                                     - 15 -
<PAGE>   16
                  May 31, 1995 ("Registrant's 1995 10-K").

       3.2        Certificate of Amendment to Articles of Incorporation of
                  Registrant changing the name of Registrant to The Nahdree
                  Group, Ltd., effective May 31, 1998. Incorporated by reference
                  to Exhibit 3.2 of Registrant's Annual Report on Form 8-K for
                  the fiscal year ended May 31, 1998 ("Registrant's 1998 10-K").

       3.3        By-Laws of Registrant, as amended. Incorporated by reference
                  to Exhibit 3.2 of Registrant's 1995 10-K.

       4.1        Specimen Certificate of Common Stock of Registrant.
                  Incorporated by reference to Exhibit 4.1 of Registrant's 1998
                  10-K.

      10.1        Stock Purchase Agreement dated October 16, 1997, among
                  Registrant, Vasiliki Della Pasvantidou Rounick ("Della
                  Rounick"), Nah Nah Collection, Inc.("Nah Nah"), and Hong J.
                  Han. Incorporated by reference to Exhibit 2.1 of Registrant's
                  Current Report on Form 8-K dated December 31, 1997.

      10.2        Debt Purchase and Intercreditor Agreement dated December 24,
                  1997, among Hong J. Han, Della Rounick and The He-Ro Group,
                  Inc. Incorporated by reference to Exhibit C of Form 13-D of
                  Hong J. Han filed January 13, 1998.

      10.3        Guaranty by Registrant and its subsidiaries in favor of Hong
                  J. Han and Della Rounick as Executrix of the Estate of
                  Herbert Rounick dated December 24, 1997. Incorporated by
                  reference to Exhibit 10.3 of Registrant's Form 10-Q for the
                  quarter ended February 28, 1998.

      10.4        Registration Rights Agreement dated December 24, 1997, between
                  Registrant and Hong J. Han. Incorporated by reference to
                  Exhibit 10.4 of Registrant's Form 10-Q for the quarter ended
                  February 28, 1998.

      10.5        Amended and Restated Employment Agreement dated November 1,
                  1997, between The He-Ro Group, Inc. and Katherine Wong.
                  Incorporated by reference to Exhibit 10.5 of Registrant's Form
                  10-Q for the quarter ended February 28, 1998.


                                     - 16 -
<PAGE>   17
      10.6        Amended and Restated Employment Agreement dated November 1,
                  1997, between The He-Ro Group, Inc. and David Minka.
                  Incorporated by reference to Exhibit 10.6 of Registrant's Form
                  10-Q for the quarter ended February 28, 1998.

      10.7        Agreement dated July 30, 1997, among Nah Nah, C.A.S. Designs,
                  Inc. and Constance Saunders. Incorporated by reference to
                  Exhibit 10.7 of Registrant's Form 10-Q for the quarter ended
                  February 28, 1998.

      10.8        Employment Agreement dated January 1, 1997, between Nah Nah,
                  and Victor Costa. Incorporated by reference to Exhibit 10.8 of
                  Registrant's Form 10- Q for the quarter ended February 28,
                  1998.

      10.9        Sublease dated March 6, 1997, between The He-Ro Group, Inc.
                  (as sublessor) and Harve Benard (as sublessee) relating to
                  premises located at One American Way, Secaucus, New Jersey.
                  Incorporated by reference to Exhibit 10.2 of Registrant's
                  Annual Report on Form 10-K for the fiscal year ended May 31,
                  1997.

      10.10.1     License Agreement dated June 1, 1990, between The He-Ro Group,
                  Inc., and Oleg Cassini, Inc. ("Cassini License").
                  Incorporated by reference to Exhibit 10.8 of Registrant's
                  1995 10-K.

      10.10.2     Letter Agreement dated December 15, 1995, from Oleg Cassini,
                  Inc. to The He-Ro Group, Inc., amending the Cassini License.
                  Incorporated by reference to Exhibit 10.8.1 of Registrant's
                  Annual Report on Form 10-K for the fiscal year ended May 31,
                  1996 ("Registrant's 1996 10-K").

      10.10.3     Agreement dated December 30, 1997, between The HeRo Group,
                  Inc., and Oleg Cassini, Inc., amending the Cassini License.
                  Incorporated by reference to Exhibit 10.4 of Registrant's Form
                  10-Q for the quarter ended February 28, 1998.

      10.11       1991 Stock Option Plan. Incorporated by reference to Exhibit
                  10.12 of Registrant's 1995 10-K.

      10.12       1992 Outside Director Stock Option Plan. Incorporated by
                  reference to Exhibit 10.13 of Registrant's 1995 10-K.


                                     - 17 -
<PAGE>   18
      10.13       1993 Outside Director Stock Option Plan. Incorporated by
                  reference to Exhibit 10.14 of Registrant's 1995 10-K.

      10.14       Amended and Restated 1994 Outside Director Stock Option Plan.
                  Incorporated by reference to Exhibit 10.15 of Registrant's
                  1996 10-K.

      10.15       License Agreement between N.N.C.S., Inc. and The Nahdree
                  Group, Ltd. dated as of June 1, 1998. Incorporated by
                  reference to Exhibit 10.15 of Registrant's 1998 10-K.

     *27          Financial Data Schedule 

      99.1        Irrevocable Proxy granted by Della Rounick in favor of Hong J.
                  Han. Incorporated by reference to Exhibit B of Form 13-D of
                  Hong J. Han filed January 13, 1998.

      99.2        Factoring Agreement dated December 24, 1997, among The He-Ro
                  Group, Inc., HRNL, Inc., Nah Nah, Registrant, certain other
                  subsidiaries and Heller Financial, Inc. Incorporated by
                  reference to Exhibit 99.1 of Registrant's Current Report on
                  Form 8-K dated December 31, 1997.

      99.3        Subordination Agreement dated December 24, 1997, among Hong J.
                  Han, Nah Nah, and Heller Financial Inc. subordinating
                  indebtedness owed by Nah Nah to Hong J. Han. Incorporated by
                  reference to Exhibit 99.3 of Registrant's Form 10-Q for the
                  quarter ended February 28, 1998.

      99.4        Subordination Agreement dated December 24, 1997, among Della
                  Rounick, Hong J. Han, The He-Ro Group, Inc., and Heller
                  Financial Inc. subordinating indebtedness owed by The He-Ro
                  Group, Inc. to Della Rounick and Hong J. Han. Incorporated by
                  reference to Exhibit 99.4 of Registrant's Form 10- Q for the
                  quarter ended February 28, 1998.

      99.5        Letter agreement dated August 27, 1998, between The Nahdree
                  Group, Inc. f/k/a The He-Ro Group, Inc., Nah Nah, HRNL, Inc.,
                  Registrant, certain other subsidiaries and Heller Financial,
                  Inc., amending as of May 31, 1998, the Factoring and Revolving
                  Inventory Loan and Security Agreement dated December 24, 1997,
                  between The He-Ro Group, Inc., Nah Nah, HRNL, Inc.,
                  Registrant, certain other subsidiaries and Heller Financial,
                  Inc. Incorporated by reference to Exhibit 99.5


                                     - 18 -
<PAGE>   19
                  of Registrant's 1998 10-K.

      99.6        Letter agreement dated January 14, 1999, between The Nahdree
                  Group, Inc. f/k/a The He-Ro Group, Inc., Nah Nah, HRNL, Inc.,
                  Registrant, certain other subsidiaries and Heller Financial,
                  Inc., waiving Existing Defaults under the Factoring and
                  Revolving Inventory Loan and Security Agreement dated December
                  24, 1997, between The He-Ro Group, Inc., Nah Nah, HRNL, Inc.,
                  Registrant, certain other subsidiaries and Heller Financial,
                  Inc. Incorporated by reference to Exhibit 99.6 of Registrant's
                  Form 10-Q for the quarter ended November 30, 1998.

    *99.7         Letter agreement dated January 27, 1999, between The Nahdree
                  Group, Inc. f/k/a The He-Ro Group, Inc., Nah Nah, HRNL, Inc.,
                  Registrant, certain other subsidiaries and Heller Financial,
                  Inc., superseding the letter agreement dated January 14, 1999
                  and waiving Existing Defaults under the Factoring and
                  Revolving Inventory Loan and Security Agreement dated December
                  24, 1997, between The He-Ro Group, Inc., Nah Nah, HRNL, Inc.,
                  Registrant, certain other subsidiaries and Heller Financial,
                  Inc.

-------------------

*     Exhibit filed herewith

      (b)   Reports on Form 8-K

            There were no reports filed on Form 8-K for the three-month period
ended February 28, 1999.


                                     - 19 -
<PAGE>   20
                                   SIGNATURES

            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.


                                          THE NAHDREE GROUP, LTD.



Date:  April 14, 1999                     By:   /s/ Hong J. Han
                                                ----------------
                                                Hong J. Han
                                                President



Date:  April 14, 1999                           /s/ Chris Han
                                                ----------------
                                                Chris Han
                                                Chief Financial Officer



0246H


                                     - 20 -