<PAGE>   1
                                                                   Exhibit 99.5






                            NEW VALLEY HOLDINGS, INC.

                              FINANCIAL STATEMENTS


                               SEPTEMBER 30, 1998


<PAGE>   2


                            NEW VALLEY HOLDINGS, INC.

                              FINANCIAL STATEMENTS


                                TABLE OF CONTENTS



<TABLE>
<CAPTION>


                                                                                                              PAGE
                                                                                                              ----

<S>                                                                                                           <C>
   Balance Sheets as of September 30, 1998 and December 31, 1997......................................         2

   Statements of Operations for the three and nine months ended September 30, 1998 and
        September 30, 1997.............................................................................        3

   Statement of Stockholder's Equity (Deficit) for the nine months ended
        September 30, 1998.............................................................................        4

   Statements of Cash Flows for the nine months ended September 30, 1998 and
        September 30, 1997............................................................................         5

   Notes to Financial Statements......................................................................         6


</TABLE>



<PAGE>   3
                            NEW VALLEY HOLDINGS, INC.
                                 BALANCE SHEETS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

===============================================================================

<TABLE>
<CAPTION>



                                                                                   September 30,         December 31,
                                                                                       1998                  1997
                                                                                   -------------         ------------
<S>                                                                                  <C>                  <C>     
ASSETS

  Cash and cash equivalents..............................................            $     23             $      6

  Investment in New Valley:
    Redeemable preferred stock...........................................              33,390               59,359
    Common stock.........................................................             (33,390)             (59,359)
                                                                                     --------             --------
    Total investment in New Valley.......................................                              
                                                                                     --------             --------

  Total assets...........................................................            $     23             $      6
                                                                                     ========             ========


LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

  Payable to parent......................................................                                 $     56
  Current income taxes payable to parent.................................               6,333                6,298
                                                                                     --------             --------

  Total liabilities......................................................               6,333                6,354
                                                                                     --------             --------

  Commitments and contingencies..........................................

  Common stock, $0.01 par value, 100 shares authorized, issued
    and outstanding......................................................
  Additional paid-in capital.............................................               7,633                7,633
  Deficit................................................................             (42,787)             (25,737)
  Accumulated other comprehensive income.................................              28,844               11,756
                                                                                     --------             --------

  Total stockholder's equity (deficit)...................................              (6,310)              (6,348)
                                                                                     --------             --------

  Total liabilities and stockholder's equity (deficit)...................            $     23             $      6
                                                                                     ========             ========

</TABLE>



                     The accompanying notes are an integral
                        part of the financial statements.




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<PAGE>   4
                            NEW VALLEY HOLDINGS, INC.
                            STATEMENTS OF OPERATIONS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

===============================================================================


<TABLE>
<CAPTION>


                                                                              Three Months Ended            Nine Months Ended
                                                                         ----------------------------- -------------------------
                                                                           Sept. 30,      Sept. 30,      Sept. 30,     Sept. 30,
                                                                             1998           1997           1998           1997
                                                                         -------------- -------------- -------------- ----------
<S>                                                                        <C>            <C>           <C>            <C>      
Equity in loss of New Valley.....................................          $(8,906)       $(6,973)      $(20,295)      $(21,268)
                                                                           -------        -------       --------       --------
Interest income..................................................               48                           125              6

General and administrative expenses .............................               (2)            (4)           (24)           (34)
                                                                           -------        -------       --------       --------

Loss before income taxes.........................................           (8,860)        (6,977)       (20,194)       (21,296)
                                                                           -------        -------       --------       --------

Provision (benefit) for income taxes:
   Current.......................................................               16             (2)            36            (10)
   Deferred......................................................           (1,123)           (24)        (1,123)           (40)
                                                                           -------        -------       --------       --------

Income tax benefit...............................................           (1,107)           (26)        (1,087)           (50)
                                                                           -------        -------       --------       --------

Loss from continuing operations..................................           (7,753)        (6,951)       (19,107)       (21,246)

Income from discontinued operations of New Valley,
     net of income taxes.........................................            2,085                         2,085               
                                                                           -------        -------       --------       --------

Net loss ........................................................          $(5,668)       $(6,951)      $(17,022)      $(21,246)
                                                                           =======        =======       ========       ========

</TABLE>


                     The accompanying notes are an integral
                        part of the financial statements.




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<PAGE>   5

                           NEW VALLEY HOLDINGS, INC.
                   STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

===============================================================================

<TABLE>
<CAPTION>
                                                                                                   Accumulated
                                                                        Additional    Retained       Other
                                                       Common Stock      Paid-In      Earnings    Comprehensive
                                                    Shares    Amount     Capital       Deficit        Other           Total
                                                    ------    ------    ----------    --------     -------------     --------- 
<S>                                                  <C>       <C>                    <C>             <C>            <C>      
Balance, December 31, 1997........................   100       $         $7,633       $(25,737)       $11,756        $ (6,348)

Unrealized holding gain on investment 
 in New Valley................                                                                         17,088          17,088

Dividend to parent................................                                         (28)                           (28)

Net loss..........................................                                     (17,022)                       (17,022)
                                                     ---       -----     ------       --------        -------        --------
 
Balance, September 30, 1998.......................   100                 $7,633       $(42,787)       $28,844        $ (6,310)
                                                     ===       =====     ======       ========        =======        ========

</TABLE>



                     The accompanying notes are an integral
                        part of the financial statements.




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<PAGE>   6
                           NEW VALLEY HOLDINGS, INC.
                            STATEMENTS OF CASH FLOWS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

===============================================================================

<TABLE>
<CAPTION>

                                                                                        Nine Months Ended
                                                                              ----------------------------------
                                                                                September 30,      September 30,
                                                                                    1998                1997
                                                                              ------------------ ---------------
<S>                                                                                 <C>                 <C>
Net cash provided by operating activities................................           $ 45                $ 6
                                                                                    ----                ---

Net cash provided by investing activities................................

Net cash used in financing activities....................................            (28)

Net increase in cash and cash equivalents................................             17                  6

Cash and cash equivalents at beginning of period.........................              6                  1
                                                                                    ----                ---

Cash and cash equivalents at end of period...............................           $ 23                $ 7
                                                                                    ====                ===
</TABLE>


                     The accompanying notes are an integral
                        part of the financial statements.




                                      -5-
<PAGE>   7

                            NEW VALLEY HOLDINGS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


1.    BASIS OF PRESENTATION OF FINANCIAL STATEMENTS

      ORGANIZATION. New Valley Holdings, Inc. (the "Company") was formed on
      September 9, 1994, pursuant to the laws of Delaware, by BGLS Inc. ("BGLS")
      to act as a holding company for certain stock investments in New Valley
      Corporation ("New Valley"). BGLS, which owns 100% of the authorized,
      issued and outstanding common stock of the Company, is a wholly-owned
      subsidiary of Brooke Group Ltd. ("Brooke"), a Delaware corporation whose
      stock is traded on the New York Stock Exchange.

      ESTIMATES AND ASSUMPTIONS. The preparation of financial statements in
      conformity with generally accepted accounting principles requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities, disclosure of contingent assets and
      liabilities and the reported amounts of revenues and expenses. Actual
      results could differ from those estimates.

      CASH AND CASH EQUIVALENTS. For purposes of statements of cash flows, cash
      includes cash on deposit in banks and cash equivalents, comprised of
      short-term investments which have an original maturity of 90 days or less.
      Interest on short-term investments is recognized when earned.

      NEW ACCOUNTING PRONOUNCEMENTS. In June 1997, the Financial Accounting
      Standards Board issued Statement of Financial Accounting Standards
      ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS No. 130, which
      the Company adopted in the first quarter of 1998, establishes standards
      for reporting and displaying comprehensive income and its components in a
      full set of general-purpose statements. For the Company, other components
      of stockholders' equity include such items as the Company's proportionate
      interest in New Valley's capital transactions and unrealized gains and
      losses on investment securities. The implementation of SFAS No. 130 in the
      first quarter 1998 did not have any material effect on the consolidated
      financial statements.


2.    INVESTMENT IN NEW VALLEY CORPORATION

      At September 30, 1998, the Company's investment in New Valley consisted of
      a 41.7% voting interest. At September 30, 1998, the Company owned 57.7% of
      the outstanding $15.00 Class A Increasing Rate Cumulative Senior Preferred
      Shares ($100 Liquidation Value), $.01 par value ("Class A Preferred
      Shares") and 41.5% of New Valley's common shares, $.01 par value (the
      "Common Shares").

      The Class A Preferred Shares are accounted for as debt securities pursuant
      to the requirements of SFAS No. 115, "Accounting for Certain Investments
      in Debt and Equity Securities", and are classified as available-for-sale.
      The Common Shares are accounted for pursuant to Accounting Principles
      Board Opinion No. 18, "The Equity Method of Accounting for Investments in
      Common Stock".

      The Company determines the fair value of the Class A Preferred Shares
      based on the quoted market price. Through September 30, 1996, earnings on
      the Class A Preferred Shares were comprised of dividends accrued during
      the period and the accretion of the difference between the Company's basis
      and their mandatory redemption price. During the quarter ended September
      30, 1996, the decline in the market value of the Class A Preferred Shares,
      the dividend received on the Class A Preferred Shares and the Company's
      equity in losses incurred by New Valley caused the carrying value of the
      Company's investment in New Valley to be reduced to zero. Beginning in the
      fourth quarter of 1996, the Company suspended the recording of its
      earnings on the dividends accrued and the accretion of the difference
      between the Company's basis in the Class A Preferred Shares and their
      mandatory redemption price.





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<PAGE>   8
                            NEW VALLEY HOLDINGS, INC.
                          NOTES TO FINANCIAL STATEMENTS
         (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) - (Continued)


      The Company's investment in New Valley at September 30, 1998 is summarized
below:


                                       Number of          Fair         Carrying
                                         Shares          Value          Amount
                                       ---------         -----         --------
   Class A Preferred Shares.......       618,326        $33,390        $ 33,390
   Common Shares..................     3,969,962          1,489         (33,390)
                                                        -------        --------
                                                        $34,879        $
                                                        =======        ========

      In November 1994, New Valley's First Amended Joint Chapter 11 Plan of
      Reorganization, as amended ("Joint Plan"), was confirmed by order of the
      United States Bankruptcy Court for the District of New Jersey and on
      January 18, 1995, New Valley emerged from bankruptcy reorganization
      proceedings and completed substantially all distributions to creditors
      under the Joint Plan. Pursuant to the Joint Plan, among other things, the
      Class A Preferred Shares, the Class B Preferred Shares, the Common Shares
      and other equity interests were reinstated and retained all of their
      legal, equitable and contractual rights.

      The Class A Preferred Shares of New Valley are required to be redeemed on
      January 1, 2003 for $100.00 per share plus dividends accrued to the
      redemption date. The shares are redeemable, at any time, at the option of
      New Valley, at $100.00 per share plus accrued dividends. The holders of
      Class A Preferred Shares are entitled to receive a quarterly dividend, as
      declared by the Board of Directors, payable at the rate of $19.00 per
      annum. At September 30, 1998, the accrued and unpaid dividends arrearage
      was $204,050 ($190.44 per share).


3.    NEW VALLEY CORPORATION

      Summarized financial information for New Valley as of September 30, 1998
      and December 31, 1997 and for the three and nine months ended September
      30, 1998 and 1997 follows:


                                                  September 30,    December 31,
                                                       1998            1997
                                                  -------------    ------------

Current assets, primarily cash and marketable
   securities...................................   $   73,864       $ 118,642
Non-current assets..............................      177,017         322,749
Current liabilities.............................       67,238         128,128
Non-current liabilities.........................       75,654         185,024
Redeemable preferred stock......................      300,711         258,638
Shareholders' deficit...........................     (192,722)       (130,399)




                                      -7-

<PAGE>   9
                            NEW VALLEY HOLDINGS, INC.
                          NOTES TO FINANCIAL STATEMENTS
         (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) - (Continued)

<TABLE>
<CAPTION>

                                                             Three Months Ended                  Nine Months Ended
                                                      ----------------- ---------------- ----------------- -----------------
                                                       Sept. 30, 1998   Sept. 30, 1997    Sept. 30, 1998    Sept. 30, 1997
                                                      ----------------- ---------------- ----------------- -----------------
<S>                                                        <C>               <C>               <C>              <C>     
Revenues   ....................................            $ 19,440          $ 26,704          $78,552          $ 76,652
Costs and expenses..............................             28,664            33,782           95,633           100,020
Loss from continuing operations.................             (8,739)           (6,754)         (15,458)          (21,944)
Income from discontinued operations.............              6,860                              7,740
Net loss applicable to common shares(A).........            (22,622)          (24,141)         (67,051)          (72,241)
</TABLE>
---------------------
         (A) Considers all preferred accrued dividends, whether or not declared.

      On January 31, 1997, New Valley entered into a stock purchase agreement
      with Brooke (Overseas) Ltd. ("BOL"), a wholly-owned subsidiary of BGLS,
      and acquired all of BOL's shares (the "BML Shares") in BrookeMil Ltd.
      ("BML"), representing 99.1% of the common stock of BML, which is engaged
      in real estate development in Russia. New Valley paid BOL a purchase price
      of $55,000 for the BML Shares, consisting of $21,500 in cash and a New
      Valley $33,500 9% promissory note. The note was paid in full in 1997.

      In February 1998, New Valley and Apollo Real Estate Investment Fund III,
      L.P. ("Apollo") organized Western Realty Development LLC ("Western Realty
      Ducat") to make real estate and other investments in Russia. In connection
      with the formation of Western Realty, New Valley agreed, among other
      things, to contribute the real estate assets of BML, including Ducat Place
      II and the site for Ducat Place III, to Western Realty and Apollo agreed
      to contribute up to $58,750, including the investment in Western Realty
      Repin discussed below. Through September 30, 1998, Apollo had funded
      $30,550 of its investment in Western Realty Ducat.

      The ownership and voting interests in Western Realty Ducat will be held
      equally by Apollo and New Valley. Apollo will be entitled to a preference
      on distributions of cash from Western Realty Ducat to the extent of its
      investment ($40,000), together with a 15% annual rate of return, and New
      Valley will then be entitled to a return of $16,300 of BML-related
      expenses incurred and cash invested by New Valley since March 1, 1997,
      together with a 15% annual rate of return; subsequent distributions will
      be made 70% to New Valley and 30% to Apollo. Western Realty Ducat will be
      managed by a Board of Managers consisting of an equal number of
      representatives chosen by Apollo and New Valley. All material corporate
      transactions by Western Realty Ducat will generally require the unanimous
      consent of the Board of Managers. Accordingly, New Valley has accounted
      for its non-controlling interest in Western Realty Ducat using the equity
      method of accounting.

      New Valley recorded its basis in the investment in Western Realty Ducat in
      the amount of $60,169 based on the carrying value of assets less
      liabilities transferred. There was no difference between the carrying
      value of the investment and New Valley's proportionate interest in the
      underlying value of net assets of Western Realty Ducat.

      Western Realty Ducat will seek to make additional real estate and other
      investments in Russia. Western Realty Ducat has made a $26,300
      participating loan to, and payable out of a 30% profits interest in, a
      company organized by BOL which, among other things, acquired an interest
      in a new factory being constructed on the outskirts of Moscow by a
      subsidiary of BOL.

      In June 1998, New Valley and Apollo organized Western Realty Repin LLC
      ("Western Realty Repin") to make a $25,000 participating loan (the "Repin
      Loan") to BML. The proceeds of the loan will be used by BML for the
      acquisition and preliminary development of two adjoining sites totaling
      10.25 acres (the "Kremlin Sites") located in Moscow across the Moscow
      River from the Kremlin. BML, which is planning the development of a 1.1
      million sq. ft. hotel, office, retail and residential complex on the
      Kremlin Sites, owned 94.6% of one site and 52% of the other site at
      September 30, 1998. Apollo will be entitled to a preference on
      distributions of cash from Western Realty Repin to the extent of its
      investment ($18,750) together with a 20% annual rate of return, and New
      Valley will then be entitled to a return of its investment ($6,250),
      together with a 20% annual rate of return; subsequent distributions will
      be made 50% to New Valley and 50% to Apollo. Western Realty Repin will be 




                                      -8-
<PAGE>   10
                            NEW VALLEY HOLDINGS, INC.
                          NOTES TO FINANCIAL STATEMENTS
         (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) - (Continued)


      managed by a Board of Managers consisting of an equal number of
      representatives chosen by Apollo and New Valley. All material corporate
      transactions by Western Realty Repin will generally require the unanimous
      consent of the Board of Managers.

      Through September 30, 1998, Western Realty Repin has advanced $19,067 (of
      which $14,300 was funded by Apollo) under the Repin Loan to BML. The Repin
      Loan, which bears no fixed interest, is payable only out of 100% of the
      distributions, if made, by the entities owning the Kremlin Sites to BML.
      Such distributions shall be applied first to pay the principal of the
      Repin Loan and then as contingent participating interest on the Repin
      Loan. Any rights of payment on the Repin Loan are subordinate to the
      rights of all other creditors of BML. Apollo funded an additional advance
      of $5,300 under the Repin Loan on July 2, 1998. BML used a portion of the
      proceeds to repay New Valley for certain expenditures on the Kremlin Sites
      previously incurred. The Repin Loan is due and payable upon the
      dissolution of BML and is collateralized by a pledge of New Valley's
      shares of BML.

      As of September 30, 1998, BML had invested $15,171 in the Kremlin sites
      and held $809, in cash, which was restricted for future investment. In
      connection with the acquisition of its interest in one of the Kremlin
      Sites, BML has agreed with the City of Moscow to invest an additional
      $6,000 in 1998 and $22,000 in 1999 in the development of the property.

      The development of Ducat Place III and the Kremlin Sites will require
      significant amounts of debt and other financing. New Valley is actively
      pursuing various financing alternatives on behalf of Western Realty Ducat
      and BML. However, in light of the recent economic turmoil in Russia, no
      assurance can be given that such financing will be available on acceptable
      terms. Failure to obtain sufficient capital for the projects would force
      Western Realty Ducat and BML to curtail or delay the planned development
      of Ducat Place III and the Kremlin Sites.


4.    FEDERAL INCOME TAX

      At September 30, 1998, the Company had $8,400 of unrecognized net deferred
      tax assets, comprised primarily of future deductible temporary
      differences. A valuation allowance has been provided against this deferred
      tax asset as it is presently deemed more likely than not that the benefit
      of the tax asset will not be utilized. The Company continues to evaluate
      the realizability of its deferred tax assets and its estimate is subject
      to change.


5.    CONTINGENCIES

      BGLS has pledged its ownership interest in the Company's common stock and
      the Company's investments in the New Valley securities as collateral in
      connection with the issuance of BGLS' 15.75% Senior Secured Notes due 2001
      ("BGLS Notes").

      On March 2, 1998, BGLS entered into an agreement with AIF II, L.P. and an
      affiliated investment manager on behalf of a managed account (together,
      the "Apollo Holders") who hold approximately 41.9% of the BGLS Notes in
      which the Apollo Holders agreed to defer the payment of interest on the
      BGLS Notes held by them, commencing with the interest payment that was due
      July 31, 1997, which they had previously agreed to defer, through the
      interest payment due July 31, 2000. The deferred interest payments will be
      payable at final maturity of the BGLS Notes on January 31, 2001 or upon an
      event of default under the Indenture for the BGLS Notes.




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