UNITED STATES  SECURITIES AND EXCHANGE  COMMISSION  Washington,  D.C. 20549
FORM 10-K

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

     For the fiscal year 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: 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, New York, New York                   10022
  (Address of principal executive offices)                 (Zip Code)

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

     Securities registered pursuant to Section 12(b) of the Act: NONE

     Securities registered pursuant to Section 12(g) of the Act:

     Name of Each exchange Title of each class on which registered Common Stock,
$.01  par  value  The  NASDAQ  Stock  Market  10 1/2%  Convertible  Subordinated
Debentures Due 2007

     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,  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

The  aggregate  market  value  of the  Common  Stock,  $.01 par  value,  held by
non-affiliates  of the Registrant based upon the average bid and asked prices on
May 14,  1999,  as  reported  on The  NASDAQ  Stock  Market,  was  approximately
$10,094,830.  Shares of Common  Stock held by each  officer and  director and by
each  person  who owns 5% or more of the  outstanding  Common  Stock  have  been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate  status is not  necessarily  a conclusive  determination  for other
purposes.

As of May 14, 1999 there were 1,932,503 shares of Common Stock,  $.01 par value,
outstanding.

     DOCUMENTS  INCORPORATED  BY  REFERENCE:  Portions of the  definitive  Proxy
Statement  dated May 19, 1999 filed with the  Commission  pursuant to Regulation
14A, are incorporated into Part III.

     The exhibit index is located on page E-1

<PAGE>


     PART I

ITEM 1.     BUSINESS.

General

Andersen Group,  Inc.,  referred to herein as the "Company" or the "Registrant",
was  incorporated  under the laws of the State of  Connecticut in 1951. On April
24, 1998, the Company re-incorporated to the State of Delaware.

The Company has  historically  made  investments  in companies  that operated in
several  highly  diverse  segments,  and  which  required  extensive  management
participation in operation and restructure.  These segments have included dental
distribution and manufacture,  electronics  manufacturing and supply businesses,
ultrasonic cleaning equipment,  communications electronics, medical products and
services and video products.  More recently,  however, the Company has increased
its level of investments that do not require extensive management participation.
These passive investments  include  investments in certain U.S.-based  financial
institutions  and in the securities of Russian and Eastern  European  companies.
The Company intends to continue to make minority, non-controlling investments in
the future.

Since  1991  the   Registrant's   primary   investment,   currently   comprising
approximately 70% of the Company's total consolidated  assets, has been The J.M.
Ney  Company (JM Ney) which  historically  operated  in two  industry  segments:
Electronics,  consisting of JM Ney's electronics and ultrasonics divisions,  and
Dental. In November 1995, JM Ney sold the assets and certain  liabilities of the
Dental  segment.  In 1997,  Ney  Ultrasonics  Inc., a subsidiary  of JM Ney, was
classified as a separate industry segment  (Ultrasonic  Cleaning Equipment) and,
effective  February 28, 1998,  substantially all of the assets of the Ultrasonic
Cleaning Equipment segment were sold.

In December 1997, JM Ney borrowed $7.5 million on a 10.26% subordinated note due
2004,  with warrants  entitling  the lender to purchase  40,000 shares of JM Ney
common stock at a fixed price,  in order to have funds available for a strategic
acquisition designed to grow JM Ney's business.  If JM Ney makes an acquisition,
the Company's  ownership of JM Ney may become diluted through the issuance of JM
Ney  common  stock  as part of the  consideration  paid.  While  criteria  for a
strategic  acquisition have been identified,  no negotiations have yet commenced
and no agreements have been reached concerning any possible targets.

Industry Segment Information

Financial  information regarding the Company's industry segments is contained in
Note 19 to the Registrant's  Consolidated Financial Statements contained in Item
8 herein.

Description of Business

During the fiscal year ended  February  28,  1999,  the Company  operated in two
business  segments,  Electronics  and  Corporate.  The  Electronics  segment  is
comprised of the  activities of JM Ney.  Corporate  activities  are comprised of
investment  activities.  As previously noted, the Ultrasonic  Cleaning Equipment
segment  was  sold  effective  February  28,  1998  and has  been  treated  as a
discontinued operation in the Company's Consolidated Financial Statements.


Electronics Segment

Products.  The Electronics  segment is a full-service,  precious metal and parts
supplier  to  automotive,   medical,   industrial   electronics,   military  and
semi-conductor  manufacturers.  JM  Ney's  fully  integrated  approach  includes
fabrication  and  manufacture of its precious  metal alloys,  as well as design,
engineering and  metallurgical  support.  The fabrication  capabilities  include
stamping, wire drawing, rolling from ingot to foil, precision turning, injection
and insert molding, and refining.

JM Ney specializes in the engineering and  manufacturing of precious metal alloy
contacts and contact assemblies aimed at low amperage  applications.  Electrical
contacts  made of precious  metals,  including  gold,  platinum,  palladium  and
silver,  are  considered  extremely  dependable  as the  materials are inert and
highly  resistant to corrosion  and wear.  In  developing a finished  contact or
assembly, JM Ney's technical staff works closely with customers, typically on an
engineer-to-engineer  level,  in order to design a product that meets all of the
metallurgical, electronic, dynamic and other performance specifications required
for the customer's  applications.  JM Ney designs and builds the necessary molds
and tools as well as designs and  manufactures  the end product.  By controlling
the total  process,  JM Ney believes it has a competitive  advantage  over other
companies in  technology,  cost and response  time. JM Ney has attained ISO 9001
certification and QS9000  certification for the manufacture of its products,  as
well as  approval  by the  Japanese  Industrial  Standards  (JIS) and the United
States Food and Drug Administration.

In  connection  with the sale of the assets  and  liabilities  of the  Company's
Dental segment in November,  1995, JM Ney (and the Company,  solely for purposes
of a non-competition covenant) entered into a three-year manufacturing agreement
to alloy and fabricate precious metals for Ney Dental International, Inc. (NDI),
a successor  company to the  purchaser of JM Ney's dental  business.  As part of
this agreement,  JM Ney and the Company agreed,  for a ten-year  period,  not to
sell alloys, equipment or merchandise into the dental market that NDI serves. JM
Ney is, however, permitted to continue producing, selling and marketing precious
metal  copings and other  machined  and molded parts and material for use in the
dental implant industry. Although the three-year manufacturing agreement expired
in  November  1998,  JM  Ney  still  manufactures   products  for  NDI,  but  at
significantly reduced levels.

Competition. JM Ney's business has limited direct competition with regard to the
manufacture of low amperage precious metal contacts and contact assemblies,  due
to the  inherent  risks which  accompany  the  engineering  and  manufacture  of
precious metals (i.e., high start-up and inventory costs,  theft,  etc.).  While
some  competitors  offer  similar  products,  the  Company  believes  that these
operations  lack vertical  integration to compete across the entire  spectrum of
products.  JM Ney faces  indirect  competition  from companies such as Engelhard
Corporation  and  Johnson  Matthey,   Inc.,  which  have  significantly  greater
resources  and which are involved in higher  volume  production of more standard
precious metal alloys.

Sales and Marketing. JM Ney sells to more than 800 customers, with approximately
84% of its sales being made to  customers in the United  States.  JM Ney's sales
are  made   domestically   through   both   field   sales   and   manufacturers'
representatives located in key geographic markets. Internationally, JM Ney sells
through manufacturers'  representatives,  independent  distributors and original
equipment manufacturers.

Two customers in the Electronics segment (Implant Innovations, Inc., a purchaser
of precision  machined  precious metal  components and precious metal materials,
and First Inertia, Inc., a purchaser of electronic components for the automotive
market)  accounted  for  16.1%  and  13.9%,  respectively,  of the  Registrant's
consolidated  sales in fiscal  1999.  During  the prior  year,  these  customers
comprised 14.9% and 12.6% of sales, respectively.

Research and Development.  During fiscal years 1999, 1998, and 1997 research and
development   expenditures  from  continuing  operations  totaled  approximately
$1,888,000, $1,444,000 and $1,228,000, respectively.

Sources and  Availability of Raw Materials and Components.  JM Ney purchases its
raw  materials,  including  precious  metals,  and  the  components  used in the
manufacture of its products from a number of domestic  suppliers,  and generally
is not  dependent  upon any single  supplier.  Although JM Ney utilizes  Russian
palladium  in the  manufacture  of  many of its  products,  and  despite  recent
publicized events regarding  availability of palladium  shipments from Russia to
the world market,  the Company  believes that its sources of supply are adequate
for its continuing needs.

Corporate Segment

The   Corporate   Segment  is  comprised  of  the   Company's   investment   and
administrative activities. This includes the management of the Company's trading
portfolios and longer-term  investments,  as described below.  This segment also
includes the operation of Andersen  Realty,  Inc.,  which holds a 108,000 square
foot office  building in  Bloomfield,  Connecticut,  and the  monitoring  of the
Company's  continuing interest in the ultrasonic cleaning technology sold during
the prior fiscal year.  Such  continuing  interest is  represented  by royalties
received pursuant to a technology  assignment agreement,  as amended,  which was
entered  into  with  the  buyer of the  former  Ultrasonics  Cleaning  Equipment
segment.  During the fiscal year ended February 28, 1999,  the Company  realized
approximately $60,000 of revenue pursuant to this agreement.

Trading  Portfolio.  At February  28,  1999,  the  Company  had a  portfolio  of
short-term investments with a reported value of $6,014,000.  The reported amount
is reflected net of a $65,000  valuation  reserve to provide for  volatility and
liquidity concerns relating to marketable investments in the Ukraine and Poland.
The larger components of these investments include $5.5 million of common stocks
of domestic  savings banks,  an investment in the FM Emerging Russia Fund with a
recorded value of $294,000,  and JM Ney's investment in a Russian bond fund with
an estimated  fair value of $98,000.  JM Ney expects to realize this  investment
during  the  next  12  months  through  the  receipt  of  periodic   liquidating
distributions.

See Note 3 to the Company's  Consolidated Financial Statements contained in Item
8 herein.

Institute  for  Automated  Systems.  The Company also holds a 50%  investment in
Treglos Investments, LTD, a joint venture that is investing in the Institute for
Automated  Systems  (IAS),  a  Russian   telecommunications   company  that  has
agreements to develop a data transmission network throughout the Commonwealth of
Independent States. The joint venture owns approximately 6% of IAS. Although the
Company's investment,  including certain development costs, totals approximately
$835,000,  it is recorded at $83,500 due to other than  temporary  impairment in
its value  reflecting  the collapse in the market value for Russian  securities.
Among  the  joint  venture  partners  are the  Company's  Chairman  and  another
Director.  See  Note  7  to  the  Company's  Consolidated  Financial  Statements
contained in Item 8 herein, and Certain  Relationships and Related  Transactions
in Item 13.

VSMPO.  The Company also owns 43,803 shares of VSMPO, a  Russian-based  titanium
producer  and  processor.  These  shares were  acquired  through the purchase in
fiscal 1998 of 9,734 shares of AVISMA,  a predecessor  company to VSMPO,  for an
aggregate  cost of  approximately  $1,225,000.  The  investment  is  valued  for
financial  reporting  purposes  at  $122,500  due  to an  other  than  temporary
impairment in its value reflecting the collapse of Russian securities.  See Note
7 to the Company's Consolidated Financial Statements contained in Item 8 herein,
and Certain Relationships and Related Transactions in Item 13.

Discontinued Ultrasonic Cleaning Equipment Segment
Effective  February 28, 1998, the Company sold the net assets of Ney Ultrasonics
Inc. (Ney Ultrasonics) which until that date comprised the Company's  Ultrasonic
Cleaning Equipment  segment.  The Company received $2.4 million at closing while
additional  consideration  was dependent on the  finalization  of FY98 financial
information. The determination of the purchase price remained in dispute until a
settlement  agreement  was reached in February  1999,  resulting  in $400,000 of
additional  consideration  being paid to the  Company.  The  Company  expects to
receive further  consideration  during the next several years based on growth of
sales of certain products by the purchasers of this business.  See Note 5 to the
Company's Consolidated Financial Statements contained in Item 8 herein.

Compliance with Environmental Protection Laws
Management  of  the  Company   believes  that  the  Company  and  its  operating
subsidiaries are in material compliance with applicable federal, state and local
environmental regulations. Compliance with these regulations has not in the past
had any material  effect on the  Company's  capital  expenditures,  consolidated
statements  of  operations  or  competitive  position,   nor  does  the  Company
anticipate that compliance with existing  regulations  will have any such effect
in the near future.

Employees
As of April 30, 1999, the Company, including all subsidiaries, had 188 full-time
employees and two part-time employees. None of these employees is represented by
a labor  union,  and the  Company  is not  aware of any  organizing  activities.
Neither the Company nor any of its  subsidiaries has experienced any significant
work  stoppage due to any labor  problems.  The Company  considers  its employee
relations to be satisfactory.

Executive Officers of the Company
The Executive Officers of the Company and certain  significant  employees of its
subsidiaries are as follows:
<TABLE>
<CAPTION>


------------------------------- -------- ----------------------------------------------------------- -----------------
<S>                                <C>    <C>                                                          <C>
                                                                                                         Officer
             Name                 Age                             Position                                Since
------------------------------- -------- ----------------------------------------------------------- -----------------
Francis E. Baker                  69     Chairman and Secretary                                            1959
Oliver R. Grace, Jr.              45     President and Chief Executive Officer                             1997
Peter R. Barker                   48     Vice President and Chief Financial Officer                        1999
Ronald N. Cerny                   47     President, The J.M. Ney Company                                   1993
Andrew M. O'Shea                  40     Chief Financial Officer and Secretary,
                                         The J.M. Ney Company                                              1995
Eugene E. Phaneuf                 52     Vice President - Operations,
                                         The J.M. Ney Company                                              1996
------------------------------- -------- ----------------------------------------------------------- -----------------
</TABLE>

Except as set forth below, all of the officers and significant  employees of its
subsidiaries  have been associated  with the Company in their present  positions
for more than the past five years.

Mr. Grace,  Jr. has been a Director of the Company since 1986 and President
and Chief Executive  Officer since June 1, 1997. Mr. Grace,  Jr. was Chairman of
the Company from March 1990 to May 1997. Mr. Grace,  Jr. has also been President
of AG Investors, Inc., one of the Company's subsidiaries, since 1992. Mr. Grace,
Jr. is a General  Partner of The Anglo  American  Security  Fund L.P. Mr. Grace,
Jr.,  is the  brother  of John S.  Grace,  a member  of the  Company's  Board of
Directors.

Mr.  Baker became  Chairman on June 1, 1997.  He has been a Director of the
Company since 1959 and was President and Chief Executive Officer from 1959 until
May 1997. Mr. Baker is also the Secretary of the Company, a position he has held
since May 1997.

Mr. Barker became Vice President and Chief  Financial  Officer of the Company in
January 1999. Prior to joining the Company,  he served as Managing  Director and
Chief Financial Officer of Spring  Investment  Corporation from 1994 to 1998 and
previously  held the position of Founder and Executive  Vice President of Global
Intermediary, Inc. from 1982 to 1994.

Mr. Cerny has served as President of JM Ney since November 1995. From April 1993
to November  1995,  Mr.  Cerny was the General  Manager of JM Ney's  Electronics
Division.  From 1988 until  joining JM Ney,  Mr.  Cerny  served as  Director  of
Operations  (1990-1993) and Director of Sales & Marketing (1988 to 1990) for the
Materials  Technology  Division  of Johnson  Matthey,  Inc.,  a precious  metals
fabricator.

Mr.  O'Shea  joined the Company in  December  1995 as  Treasurer  and Chief
Financial  Officer of JM Ney. In November  1997 he was also  appointed  JM Ney's
Secretary. From 1994 until joining the Company, Mr. O'Shea was Vice-President of
Finance and  Administration for the WorldCrisa  Corporation.  From 1990 to 1994,
Mr. O'Shea  worked for Buxton Co. in various  financial  management  capacities,
including Senior  Vice-President,  Finance and  Administration.  Mr. O'Shea is a
Certified Public Accountant.

Mr.   Phaneuf   joined   JM  Ney  in  1990.   He  was   promoted   to  Vice
President-Operations  of JM Ney in March 1996. From April 1994 to February 1996,
Mr.  Phaneuf was JM Ney's  Director of  Operations.  He was also Acting  General
Manager of Ney Ultrasonics  from April 1995 through  December 1996. From 1990 to
1994, Mr. Phaneuf was JM Ney's Manager of Engineering and Manufacturing.

ITEM 2.    PROPERTIES.

The Company's  principal  executive  offices have been located in New York,  New
York since May 1998. The Company  subleases office space from an entity owned by
Oliver R. Grace, Jr., the Company's  President and Chief Executive  Officer,  at
lease rates that approximate market.

The Company's  subsidiary,  Andersen  Realty,  Inc.,  owns a 108,000 square foot
building  located in  Bloomfield,  Connecticut.  Portions of this  facility  are
leased to the present owner of its former Ultrasonic Cleaning Equipment segment,
as well as to third parties.

JM Ney owns a 100,000 square foot facility within a 16.5 acre industrial park in
Bloomfield,  Connecticut.  This site contains JM Ney's principal  operations and
general administrative offices.

The  Registrant  believes  that its plants and  properties,  and the  production
capacities  thereof,  are suitable  and  adequate for its business  needs of the
present and immediately foreseeable future.

ITEM 3.    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 JM 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,  JM 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,  JM 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.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

                                                                PART II


ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY
                   AND RELATED STOCKHOLDER MATTERS.

The  Registrant's  Common  Stock is traded on The NASDAQ  Stock Market under the
symbol (ANDR) with quotes supplied by the National Market System of the National
Association of Securities Dealers, Inc. (NASDAQ).

The approximate number of record and beneficial holders of the Registrant's
Common Stock on May 7, 1999 was 608 and 1,100, respectively. The Company's high,
low and closing  sales  prices for the common  equity,  for each full  quarterly
period within the two most recent fiscal years,  are included  below.  The stock
prices shown, which were obtained from NASDAQ,  represent prices between dealers
and do not  include  retail  markups,  markdowns  or  commissions  and  may  not
necessarily represent actual transactions.
<TABLE>
<CAPTION>


---------------------------------------------- --------------------- ------------------------ ----------------------
    Year ended February 28, 1999                       High                    Low                   Close
---------------------------------------------- --------------------- ------------------------ ----------------------
<S>                                                   <C>                     <C>                     <C>

    First Quarter                                     9 1/4                   5 3/4                   7 1/2
    Second Quarter                                    9                       4 5/8                   4 5/8
    Third Quarter                                     4 9/16                  2 5/8                   3 5/8
    Fourth Quarter                                    7 5/8                   2 11/16                 4
---------------------------------------------- --------------------- ------------------------ ----------------------
</TABLE>



<PAGE>


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

---------------------------------------------- ------------------------ --------------------- ----------------------
        Year ended February 28, 1998                    High                    Low                   Close
---------------------------------------------- ------------------------ --------------------- ----------------------
    First Quarter                                       5 1/2                    4 1/2                 5 1/8
    Second Quarter                                      6 3/4                    5                     6 1/2
    Third Quarter                                      10 1/4                    6 1/4                 7 5/8
    Fourth Quarter                                      7 1/2                    4 7/8                 5 5/8
---------------------------------------------- ------------------------ --------------------- ----------------------
</TABLE>

The Company has not paid  dividends  on its common stock since fiscal year ended
February  28,  1993,  and it does not  anticipate  paying any  dividends  in the
foreseeable future.

ITEM 6.    SELECTED FINANCIAL DATA.


The  following  table  summarizes  certain  financial  data with  respect to the
Company  and  is  qualified  in  its  entirety  by  the  Consolidated  Financial
Statements  of the Company  contained in Item 8 herein,  (amounts in  thousands,
except per share data).
<TABLE>
<CAPTION>

---------------------------------------------- ---------------- --------------- --------------- -------------- -------------
Years Ended February                                   1999          1998              1997         1996           1995
---------------------------------------------- ---------------- --------------- --------------- -------------- -------------
<S>                                                 <C>             <C>             <C>            <C>           <C>

Revenues1                                           $23,600         $28,868          $20,501        $19,437     $24,520
(Loss) income from continuing
 operations                                          (2,964)          1,770              334         (1,921)         (397)
Net (loss) income                                    (3,080)          2,212              299          1,933          (388)
(Loss) income applicable to
 common shares                                       (3,465)          1,772               22          2,389          (975)
(Loss) income from continuing
 operations per common share,
 diluted                                              (1.74)             .68              .03        (.76)           (.90)
(Loss) income per common share,
 diluted                                              (1.80)             .91              .01         1.23           (.50)
Depreciation, amortization and
 accretion                                            1,434           1,480            1,419          1,887        2,329
Total assets                                         37,119          44,771           37,677         38,798      43,679
Total debt                                           13,857          14,537           10,119          8,485      12,328
Redeemable preferred stock                                -                -           4,891          5,280      10,593
Common and other stockholders'
 equity2                                             16,429          20,196           13,647         13,625        9,913
Book value per common share                             6.18            7.97            7.05          7.04
                                                                                                                    5.13
---------------------------------------------- ---------------- --------------- --------------- -------------- -------------
</TABLE>

1 The results of Digital  GraphiX  are  included in 1995 and two months of 1996.
Revenues and (loss) income from  continuing  operations,  exclude the results of
operations of the Company's Ultrasonic Cleaning Equipment and Dental segments as
a result of their sales in February 1998 and November 1995, respectively.

2 1999 and 1998 amounts  include  preferred stock as a result of the elimination
of its mandatory redemption provisions.

<PAGE>


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS
           OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

                         RESULTS OF OPERATIONS

1999 vs. 1998

For the year ended  February  28, 1999 (FY99),  the Company  incurred a net loss
applicable to common shareholders of $3,465,000, or $(1.80) per share, basic and
diluted.  During  the  prior  fiscal  year,  the  Company  reported  net  income
applicable to common  shareholders  of  $1,772,000,  or $.92 per share basic and
$.91 diluted.

Revenues
Total revenues of $23,600,000 for FY99 were 18.2% lower than total revenues from
continuing  operations  reported  for the fiscal  year ended  February  28, 1998
(FY98). The decline was due to a $6,709,000 decrease in Investment Income (Loss)
and Other  Income,  which was  partially  offset on a 5.7% increase in net sales
from The J.M. Ney Company (JM Ney).

During  FY99,  JM Ney's  sales  increased  by  $1,441,000.  Such sales  increase
primarily  reflected the  pass-through  effect of increased  selling  prices for
products  containing  palladium  as a result of higher  market  prices  for this
particular  precious metal.  During FY99, the average market value for palladium
was approximately  $302 per troy ounce,  compared to approximately $198 per troy
ounce during FY98.  During each of the last two years,  the market for palladium
has been both volatile and generally increasing.  During FY99, the products sold
by JM Ney contained approximately 24,000 troy ounces of palladium.

Overall sales growth was hampered by (i) the General Motors labor strike,  which
reduced  demand for many of JM Ney's  products  that are sold to the  automotive
industry;  (ii) the expiration of an exclusive  manufacturing  contract with the
Company's  former Dental  segment which resulted in a sales decline of $280,000;
and (iii) delays in the  implementation  of several sales  programs to customers
who had  purchased  the  required  tooling  from JM Ney but did not  request the
anticipated level of parts production.

     Activities  which  comprise  Investment  Income  (Loss)  and  Other  Income
produced a net loss of  $3,238,000  during  FY99,  versus  income of  $3,471,000
during FY98 as follows (in thousands):
<TABLE>

<S>                                                                                     <C>                  <C>
                                                                                                  FY99        FY98
Net (loss) gain from domestic investment portfolio                                      $  (725)             $ 1,759
Net (loss) gain from Russian and Eastern European
  portfolio                                                                              (2,213)                 665
Write-down of long-term Russian investments                                              (1,609)                   -
Interest and dividends                                                                      349                  228
Rental income                                                                               482                  376
Ultrasonic royalty income                                                                    60                    -
Gain from Digital GraphiX                                                                    24                  196
Other, net                                                                                  394                  247
                                                                                      ---------             --------
                                                                                        $(3,238)             $ 3,471
                                                                                        ========             =======
</TABLE>

The domestic  portfolio loss is comprised of net realized and unrealized  losses
of $861,000  from the  Company's  portfolio of savings  bank  stocks,  $4,000 of
losses from the sale of municipal bonds and a net gain of $140,000 from the sale
of the  Company's  investment in Centennial  Cellular.  During FY99,  the market
value for Russian securities decreased  significantly resulting in an unrealized
decline of 78% in the  Company's  portfolio  of  Russian,  Ukrainian  and Polish
trading  investments.  In addition,  a JM Ney  investment in a Russian bond fund
declined in value by approximately  $299,000, or 60% of the original investment.
The Company also wrote down the value of its  long-term  investments  in IAS and
VSMPO due to the Russian  market  conditions,  and the  perceived  impact on the
Company's ability to realize value from these investments in the near term.

During  FY98,  increases  in both the  domestic  and  Eastern  European  markets
resulted in unrealized  appreciation  in the value of the  Company's  investment
portfolio.

Cost of Sales
Cost  of  sales  totaled  $18,255,000,  or  68.0%  of  net  sales,  compared  to
$17,040,000,  or 67.1% of net sales in FY98.  The decline in gross  margins from
32.9% to 32.0% was the result of the previously  noted higher  palladium  prices
which were passed on in the form of higher selling prices without a commensurate
margin markup.

During FY99,  sales of precious metal  materials in the form of wire,  strip and
rod,  represented  33.1% of sales,  as  compared  to 31.8%  for  FY98.  Material
products generally have lower average gross margins, due to the commodity nature
of this product class,  versus highly  engineered  parts and  components,  which
involve more value-added processing and higher gross billing margins. This sales
mix, and the resultant  underabsorption  of operating  expenses  contributed  to
lower average gross margins during FY99 compared to the prior year.

The FY99 margin decline was somewhat offset through  expanded metals  purchasing
programs that included  forward  purchases of palladium and sales of put options
for  the  purchase  of  palladium  as a hedge  against  JM  Ney's  manufacturing
requirements.  In  addition,  JM Ney  reduced  its  inventory  of  palladium  by
approximately  2,600 troy ounces which resulted in a LIFO gain of  approximately
$349,000  when  measured  against the  beginning  of the fiscal  year  palladium
prices.  One further element  contributing to offsetting  narrower margins was a
reclassification of approximately $240,000 in engineering costs to more properly
reflect  management's  analysis of costs that related to the  manufacture of its
products.

Selling, General and Administrative Expenses
Selling, general and administrative expenses of $6,170,000 during FY99 represent
a modest  decline from the costs  incurred in the prior fiscal year. The Company
incurred costs in FY99 totaling  $481,000 to convert JM Ney's primary  operating
software to be Y2K  compliant;  $128,000 of such costs  incurred in FY98.  Lower
legal fees and corporate level compensation  expense  contributed to the overall
decline in these costs.

Research and Development Expenses
Research and development expenses increased 30.7% to $1,888,000,  or 7.0% of net
sales,  compared to  $1,444,000,  or 5.7% of net sales in FY98. The increase was
attributable  to effort  expended  to  develop  new  alloys  and expand JM Ney's
technical  competencies  in  meeting  the  changing  requirements  of its target
markets, and to approximately  $240,000 of costs that were formerly allocated to
product costs.

Interest Expense
Interest expense of $1,735,000  during FY99 was 49.2% higher than the $1,163,000
of interest expense incurred during FY98. Most of the increase relates to a full
year of interest on a $7.5 million  subordinated note which JM Ney issued during
the fourth  quarter of FY98.  In addition,  JM Ney incurred  increased  interest
expense on high  interest  rate  palladium  leases  which served to hedge market
risk,  primarily  attributable to its refining  operations.  Such interest costs
were  offset by charges to JM Ney's  refining  customers  that were  included in
Other Income.

Income Taxes
An income tax benefit from continuing  operations of $1,484,000 was recorded for
FY99 which  represents  an effective  tax rate of 33.4%.  The  $4,547,000 of net
capital  losses  during FY99 was  comprised  of $482,000 of realized  investment
gains and $5,029,000 of net change in unrealized losses. As a result, $1,076,000
of the tax benefit is being deferred.

Discontinued Operations
In February 1999, the Company  reached a settlement  agreement with the buyer of
the net assets of its  Ultrasonics  segment which it had sold as of February 28,
1998.  Under the terms of this  settlement,  the  Company  received  $400,000 of
previously escrowed funds in addition to the $2.4 million it had received at the
closing.  In addition,  the Company also  granted the buyer  certain  allowances
against current-year and future royalty payments.  As a result of the settlement
and costs incurred leading to the agreement,  the Company  recognized a net loss
from  the sale of this  segment  of  $116,000,  net of  $71,000  of  income  tax
benefits.

In the prior year,  the Company had recorded a gain of $97,000 on this sale, net
of $84,000 of income taxes.

Preferred Dividends
During FY99, the Company incurred $385,000 of preferred dividends based upon the
revised terms of $1.50 per share.  During FY98, a total of $477,000 in dividends
and  discount  accretion  were  accrued  based on former  terms  under which the
preferred dividends were linked to the operating results of JM Ney.

1998 vs. 1997

Revenues
Total revenues from  continuing  operations of  $28,868,000  for the fiscal year
ended February 28, 1998 (FY98) were 40.8% more than the  $20,501,000 of revenues
recorded for the year ended February 28, 1997 (FY97). This increase  represented
a 23.0%  increase in sales  generated by The J.M.  Ney Company (JM Ney),  and an
increase of  $3,613,000  of  investment  and other income over the net losses of
$142,000 recorded in FY97.

JM Ney's increase in sales to $25,397,000  reflected growth in sales of contacts
for sensors used in the  automotive  industry,  and increased  sales of precious
metal  materials,  particularly  materials for use in the  manufacture of dental
implant  components.  Such sales  growth  during FY98 is  reflected  net of a 2%
decline in sales to the Company's former Dental segment.

Investment and other income totaled $3,471,000 for FY98, compared to a loss
of $142,000 in FY97, as follows (in thousands):
<TABLE>

<S>                                                                        <C>          <C>


                                                                            FY98          FY97
Net gains from domestic investment portfolio                                 $1,759       $ 1,032
Net gains from Russian and Eastern European  portfolio                          665              -
Interest and dividends                                                          228           366
Rental income                                                                   376           342
Gain from Digital GraphiX                                                       196              -
Loss from investments in Phoenix Shannon                                           -       (2,175)
Other, net                                                                      247           293
                                                                           --------       -------
                                                                            $ 3,471       $  (142)
                                                                            =======       ========
</TABLE>

Gains  from the  Company's  domestic  investment  portfolio  increased  due to a
rebound in the market value of the Company's  investment in Centennial Cellular,
which had  experienced  a decline in value in FY97,  and to continued  growth in
value from the  Company's  portfolio of financial  institutions.  All gains from
this portion of the investment portfolio in FY98 and FY97 represented  increases
in net unrealized appreciation of the underlying investments. Also, during FY98,
the Company  significantly  expanded  its  investment  activities  in Russia and
Eastern  Europe.  This resulted in the recording of net realized and  unrealized
gains of $665,000,  net of valuation  allowances of $617,000 established for the
foreign trading portfolio,  and $245,000 established for a Russian security held
for longer-term investment. Such reserves were established to address volatility
and liquidity concerns within these markets.

During FY98, Digital GraphiX, Incorporated, an investment whose results had been
consolidated  with those of the Company  through April 1995, sold its net assets
and used the  proceeds to repay notes,  redeem its  preferred  stock,  and issue
liquidating  dividends on its common stock.  As a result,  the Company  received
$196,000 in excess of the net carrying value of its investment.

During FY97,  the Company wrote off $2,175,000 in the value of its investment in
the common stock of, and a note receivable from,  Phoenix Shannon,  p.l.c. which
had been received as part of the consideration for the sale of the net assets of
the Company's former Dental segment in FY96.

Cost of Sales
Cost of sales from continuing  operations totaled  $17,040,000,  or 67.1% of net
sales in FY98,  compared  to  $13,259,000,  or 64.2% of net  sales in FY97.  The
decline  in the gross  margins  from  35.8% to 32.9%  was  caused  primarily  by
significant  increases and volatility in the price of palladium which is used in
the majority of JM Ney's  products,  and by  increases  in materials  sales as a
percentage  of overall  sales.  However,  gross  margins of  $8,357,000  in FY98
represented a 13.2% increase over FY97 levels.

During most of FY97, the price of palladium  remained  relatively stable between
$141 per troy ounce and $115 per troy ounce, with an increase at fiscal year end
to above $155 per ounce.  Such a market condition  enabled JM Ney to replace the
metal it had sold with metal of  approximately  equal value for LIFO  accounting
purposes. However, during FY98, the price of palladium fluctuated widely. Prices
ranged  from a low of $142 per troy  ounce to a high of $240 per  ounce.  During
much of this period,  the market viewed these price  increases as temporary,  as
reflected in the lower cost for  palladium in future  months.  Accordingly,  for
certain  segments of its business,  this price increase could not be immediately
passed on to JM Ney's customers. Although JM Ney had certain hedging programs in
place,  such strategies did not cover all sales programs  involving  significant
quantities of palladium.

In addition,  the Company's FY98 gross margin  benefited from lower gold prices,
which served to slightly offset the impact of the effects of the palladium price
increases and volatility.

Also,  during  FY98,  sales of precious  metal  materials,  in the form of wire,
strip, and rod represented  approximately  31.8% of sales,  compared to material
sales of 24.4% in FY97.  Material  products  generally  have lower average gross
margins,  due to the commodity nature of the product,  versus highly  engineered
parts and  components,  which involve more  value-added  processing,  and higher
gross  margins.  Such sales mix  contributed  further to the lower average gross
margins during FY98.

Selling, General and Administrative Expenses
Selling,  general and administrative expenses from continuing operations totaled
$6,260,000,  or 8.5%  more  than  the  costs  incurred  during  FY97.  Costs  of
approximately   $128,000   incurred  in  the  process  of   upgrading  JM  Ney's
manufacturing  system to be Year 2000  compliant,  an  increase  of  $167,000 of
recruiting  costs,  including  personnel fees and  advertising,  and legal costs
incurred in connection with the exchange of the Company's 10 1/2% Debentures and
change of the terms of its Preferred  Stock,  all  contributed  to the growth in
these expenses.

Research and Development Expenses
Research and development expenses increased from $1,228,000, or 5.9% of sales in
FY97, to $1,444,000,  or 5.7% of sales in FY98.  While increased  material sales
served to lower the relative comparison, the absolute increase of 17.6% reflects
the cost of efforts to develop new proprietary alloys that have similar physical
attributes to existing alloys with lower palladium content to reduce exposure to
market fluctuations,  and to work on new manufacturing processes which enable JM
Ney to offer product alternatives.

Interest Expense
Interest  expense  increased  from  $790,000  in FY97  to  $1,163,000  in  FY98.
Increased borrowings under JM Ney's revolving line of credit to support both its
working capital  requirements  and those of Ney  Ultrasonics  served to increase
interest  expense.  In addition,  significant  increases in the leasing rates of
palladium and platinum also served to increase financing costs under its line of
credit.  JM Ney was not exposed to these  volatile  interest rates to the extent
that many other companies using palladium were, thus this impact was contained.

Also, during the year, JM Ney closed on a $7.5 million  seven-year  subordinated
note that bears interest at the annual rate of 10.26%. Interest and amortization
of deferred financing costs for two months added to the interest expense total.

Income Taxes
Income tax expense  from  continuing  operations  totaled  $1,191,000  for FY98,
versus a tax benefit from  continuing  operations of $882,000 for FY97. The FY98
expense  included a net increase of $1,016,000 in deferred income taxes payable.
The  effective  tax rate for FY97 was  favorably  impacted by the  settlement of
audits of prior state income tax returns.


<PAGE>


Discontinued Operations
Effective  February 28, 1998, the Company sold the net assets of Ney Ultrasonics
Inc. for a purchase price which was estimated to be approximately  $3.5 million,
and additional contingent consideration. Net of expenses incurred in and accrued
for the transaction,  the Company recognized a gain of $97,000,  net of tax. For
the year then ended, Ney Ultrasonics Inc.  generated  approximately  $345,000 of
net income on sales of  $5,713,000.  During FY98 these  operations  generated an
increase in sales of 47.5% over FY97,  which produced the first operating profit
in its history.

Preferred Dividends
Preferred  dividends,  including the  amortization  of issuance  costs,  totaled
$477,000  during FY98,  which is a 16.1% increase over the dividends of $411,000
accrued  for  FY97.  The  dividends  per  preferred   share,   which  include  a
participating  dividend based on the operating income of JM Ney,  increased from
approximately  $1.24 per share in FY97 to approximately  $1.69 in FY98. However,
due to purchases of shares of preferred  stock during both years,  the aggregate
preferred dividends increased by a lower amount. Reversals of previously accrued
but unpaid  dividends added $37,000 and $134,000 to income  applicable to common
shareholders in FY98 and FY97, respectively.

As a result  of the  shareholder  approval  of the  change  in the  terms of the
Preferred Stock,  dividends that had been accrued from May 1993 through November
1997 were paid in February 1998.

Net Income
As a result of the income of $1,770,000  generated from  continuing  operations,
income of $345,000 from discontinued operations,  and the gain of $97,000 on the
sale of Ney Ultrasonics  Inc., total net income for FY98 was $2,212,000,  versus
net income of $299,000 in FY97. After net preferred dividends, income applicable
to common  shareholders for FY98 was $1,772,000,  or $.92 per share basic,  $.91
diluted,  versus income applicable to common  shareholders of $22,000,  or $0.01
per basic and diluted share in FY97.


LIQUIDITY AND CAPITAL RESOURCES

At February 28,  1999,  consolidated  cash and  short-term  investments  totaled
$8,555,000, which is a decrease of $2,962,000, or 25.7%, from February 28, 1998.
Within the current year total is a portfolio of common  stocks of savings  banks
valued at  $5,362,000,  the Company's  trading  portfolio of Russian and Eastern
European  securities with a reported value of $554,000,  and JM Ney's investment
in a Russian bond fund with a reported value of $98,000.

Under the terms of its $7.5 million  subordinated  note  agreement and revolving
credit  agreement  with a  commercial  bank,  JM Ney is  restricted  from making
payments to the Company except as defined.  The defined  payments are subject to
JM Ney's meeting  certain  financial  covenants.  At February 28, 1999, JM Ney's
working capital was $8,883,000 or 59.1% of consolidated net current assets,  and
its net worth,  net of net  liabilities  to the Company,  including a $4 million
subordinated  note  payable,  totaled  $7,125,000,  or  43.4%  of the  Company's
consolidated total.

The  Company is  dependent  upon  defined  payments  from JM Ney,  which in FY99
totaled  $820,000,  and on income  from its  investments  to meet its  operating
expenses, debt service and preferred dividend obligations.  The Company believes
it can meet these  requirements  in the  foreseeable  future from these  defined
sources  of cash  flows,  or from  the  proceeds  of  liquidations  of  existing
investments.

During  FY99,  the prices of the  precious  metals  that JM Ney  utilizes in the
alloying and manufacturing of its products experienced  significant  volatility.
Primarily as a net result of an increase of  approximately  $80 per ounce of the
palladium  content  of its  inventory,  and a $10 per ounce  decline in the gold
component  of its  inventory,  JM Ney's LIFO  reserve  increased  by $969,000 to
maintain the net recorded value of these inventories at their historical values.

In June 1998, SFAS No. 133  "Accounting  for Derivative  Instruments and Hedging
Activities"  was  issued.  SFAS No.  133  requires  an entity to  recognize  all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those instruments at fair value. Gains and losses resulting
from changes in the values of those derivatives would be recognized  immediately
or deferred  depending on the use of the  derivative  and if the derivative is a
qualifying hedge. The Company plans to adopt SFAS No. 133 by January 1, 2000, as
required. The Company is currently assessing the impact of this statement on the
Company's consolidated financial statements.

Forward-looking Statements

Statements  contained  in this  Form  10-K  that are not  historical  facts  are
forward-looking  statements  made pursuant to the safe harbor  provisions of the
Private  Securities  Litigation  Reform Act of 1995. In addition,  words such as
"believes,"  "anticipates,"  "expects" and similar  expressions  are intended to
identify  forward-looking  statements.  The  Company  cautions  that a number of
important  factors  could  cause  actual  results  for fiscal 2000 and beyond to
differ materially from those expressed in any forward-looking statements made by
or on  behalf  of the  Company.  Such  statements  contain a number of risks and
uncertainties,  including,  but  not  limited  to  (i)  economic  and  political
developments  in Russia and Eastern  Europe;  (ii) changes and volatility in the
market for domestic equity  securities,  particularly in the financial  services
sector,  (iii) changes in  technology  that would affect JM Ney's  products,  or
affect  the value of the  ultrasonic  cleaning  technology  on which  contingent
consideration is based; (iv) acceptance of new product  developments and (v) the
price and volatility of precious metals.  The Company cannot assure that it will
be able to anticipate or respond timely to changes which could adversely  affect
its operating  results in one or more fiscal quarters.  Results of operations in
any past period should not be considered indicative of results to be expected in
future periods.  Fluctuations in operating results may result in fluctuations in
the price of the Company's common stock.

Year 2000

The Year 2000 problems stem from three main issues: two-digit data storage, leap
year calculations, and special meanings for dates (i.e., 9/9/99). There is not a
simple solution to the Year 2000 issue due to the fact that the use of dates for
calculations is pervasive  throughout software and the use of these calculations
is not standardized.

State of Readiness.  The Company has formalized a  comprehensive  Year 2000 plan
that  encompasses its products,  vendors,  customers,  manufacturing  equipment,
technical infrastructure,  facilities, telecommunications, and business systems.
The plan consists of the following phases: inventory,  assessment,  remediation,
testing,  implementation,  and a contingency  plan for each area.  The plan also
contains the cost  associated  with providing Year 2000 solutions for each area.
The Company's  plan has been viewed  favorably by a Year 2000  consulting  firm,
which reviewed each element of the plan.

The Company has completed the process of identifying and assessing the extent to
which  the Year  2000  issue  will  affect  its  products,  vendors,  customers,
manufacturing     equipment,      technical     infrastructure,      facilities,
telecommunications  and business  systems.  To date,  most of the  financial and
operational  effort  has been  expended  in  implementing  Year  2000  compliant
solutions or JM Ney's enterprise  resource  planning (ERP) systems and technical
infrastructure. This effort was completed in October 1998. The Company is now in
the process of remediation,  testing and  implementation  of Year 2000 compliant
solutions for its manufacturing  equipment,  telecommunications,  facilities and
some minor  business  systems.  These  processes are scheduled to be complete by
September 1999.

Costs.  Through February 28, 1999,  approximately  $609,000 has been expended on
the Year 2000 project,  including $481,000 expended during FY99. Additional Year
2000  expenses to be incurred have been  estimated to total less than  $200,000.
However,  there  can be no  assurance  that  the  Company  will  not  incur  any
unanticipated   costs  in   completing   its   remediation   for   non-compliant
manufacturing equipment.

Risks.  The Company  views its greatest  area of exposure as being the degree of
compliance of some of JM Ney's manufacturing equipment.  There are machines that
do not have blue  prints,  and  information  regarding  the  programmable  logic
controls  is not  always  easy to  obtain.  These  same  machines  do not have a
mechanism to change the date,  nor do they  display or print a date.  These same
reasons  could be a positive  indicator  to  support  the idea that they are not
date-sensitive  machines.  JM Ney  will be  performing  extensive  tests  on all
manufacturing equipment during the second fiscal quarter of FY 2000. Other risks
relate  to  the  degree  of  readiness  of  the  Company's  vendors,  suppliers,
customers,  and other third parties.  Any failure by these parties to ensure the
Year 2000 compliance could have an adverse effect on the Company's position.

     Contingency.   The  Company  will  continue  to  develop  its   contingency
strategies for every area.  Special  attention will be paid to the manufacturing
and third party disciplines.

During  the first  quarter  of  FY2000,  the  Company  has been  evaluating  the
responses from its single-source and critical suppliers,  and will be requesting
updates  from  these  suppliers  as the year  progresses.  Additional  or second
sources will be identified  for those  suppliers who fail to provide  sufficient
Year 2000 information or who are not compliant by September 1999.

Based upon a comprehensive  review of exposure areas,  the Company believes that
manufacturing and other operational and administrative activities will not be at
significant risk due to the Year 2000 problem.


<PAGE>


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
         ABOUT MARKET RISK.

The  Company  and JM Ney are  exposed  to  market  risk from  changes  in equity
security prices, certain commodity prices,  interest rates and from factors that
impact equity investment in Russia, the Ukraine and Poland.

Equity Securities Risk
At February 28, 1999, the Company owned a portfolio of savings bank stock with a
market value of  $5,362,000.  The Company has pledged  this  portfolio to secure
short-term borrowings of $1,392,000. A decline in the value of these securities,
in  addition  to  reducing  working  capital  could  cause the  Company  to sell
securities or use other sources of funds to reduce the margin loan.

Foreign Investment Risk
The Company has a trading portfolio of Russian,  Ukraine and Polish  investments
with a net reported value of $558,000 and longer term Russian investments with a
reported value of $206,000.  In addition,  JM Ney has an investment in a Russian
bond  fund with a  reported  value of  $98,000.  The  realizable  value of these
investments,   particularly   Russian   components,   is  subject  to   currency
fluctuations,   illiquid  markets  and  political  risks.  The  Company  has  no
derivative  financials  instruments  to hedge the risks  associated  with  these
investments.

Commodity Price Risk
JM Ney  utilizes  significant  amounts of  precious  metals in the  products  it
manufactures  and sells.  Significant  increases  in the  market  value of these
metals, palladium,  gold and platinum, in particular,  may impact the demand for
its  products.  JM Ney generally  adjusts the selling  prices of its products if
market prices change  significantly,  or it hedges fixed selling price programs.
Accordingly,  while a change in precious metals prices may impact cost of sales,
such impact is generally met with an approximately  equivalent  charge in sales,
so  that  the  impact  on  earnings  is  minimal  or  not  present.  Significant
fluctuations  and volatility in precious metal price creates risk that purchases
of precious metals may not be efficiently  coordinated with sales.  While JM Ney
believes  it has the  programs  in place to limit  this  risk,  there  can be no
assurance  that  volatility  in price  does not  result in  intended  profits or
losses.  Also,  while increases or decreases in precious metal prices impact the
economic value of JM Ney's inventory,  such changes are generally reflected with
a  corresponding  change in the LIFO  reserve and do not affect the net reported
value of its inventory.

Interest Rate Risk
JM Ney has a revolving  line of credit which bears interest at floating rates as
described  in Note 8 to the  Company's  consolidated  financial  statements.  In
addition,  the Company has  short-term  borrowings in the form of a margin loan.
Neither the Company nor JM Ney hedges its interest rate risk, including the note
associated  with  precious  metal  consignment  arrangements  which  are tied to
precious metal leasing.

A 1% change in interest  rates would impact the  Company's  interest cost of its
short-term borrowings by approximately $15,000.  During most of FY99, JM Ney did
not have outstanding cash borrowings on its revolving line of credit,  thus a 1%
change in  interest  rates  would  have a minimal  impact on  reported  interest
expense. Most of JM Ney's usage of its credit line is in the form of consignment
borrowings of precious  metals,  much of which hedge precious  metals  inventory
represented by scrap metal of its refining  operations.  A 1% change in precious
metal  leasing  rates  would  impact  JM Ney's  interest  cost by  approximately
$20,000,  much of which would be offset by changes in market risk  surcharges to
US refining  customers.  Such leasing  costs are also impacted by charges in the
market  prices for the  precious  metals being  leased.  During FY99 the leasing
rates and market prices for palladium  fluctuated  significantly.  Leasing costs
ranged  from a high of 210%  per  annum  to a low of  9.5%,  with an  unweighted
average of approximately  40%. Market prices for palladium  contacts ranged from
$242 per troy ounce to $397 per troy ounce.  As a result,  daily lease costs for
palladium ranged from approximately  $2.16 per ounce to approximately  $0.10 per
ounce.

The Company passed these metal  fluctuations and market sensitive lease costs to
US refining customers, in the form of charges that are included in Other Income.
Accordingly, the net impact of such fluctuations is estimated to not be material
to the Company's consolidated results of operations. Due to the interest risk of
financing and managing precious metals inventory, there can be no assurance that
changes in either or both precious  metals prices or leasing rates will not have
a material impact on future results of operations.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The  following  table  summarizes  certain  financial  data with  respect to the
Company and is qualified in its entirety by the Company's Consolidated Financial
Statements contained in this Item (amounts in thousands, except per share data).
<TABLE>
<CAPTION>

Selected Quarterly Financial Data

1999 Quarterly Financial Data                         May 31          August 31             November 30     February 28
-------------------------------------------------- ------------------ ------------------ ------------------ ------------------
<S>                                                  <C>              <C>                   <C>              <C>

Net sales and revenues from continuing
 operations                                           $7,831            $1,116              $7,842               $6,811
Gross profit                                           2,515             2,086               2,215                1,767
Income (loss) from continuing operations                  53            (3,351)                611                 (277)
Net income (loss)                                         53            (3,351)                611                 (393)
Income (loss) applicable to common shares                (50)           (3,447)                515                 (483)
-------------------------------------------------- ------------------ ------------------ ------------------ ------------------
Earnings (Loss) Per Common Share1:
Continuing operations                                     (.03)           (1.77)               .27               (.25)
Net income (loss)                                         (.03)           (1.77)               .27               (.25)
-------------------------------------------------- ------------------ ------------------ ------------------ ------------------

1998 Quarterly Financial Data                         May 31          August 31             November 30     February 28
-------------------------------------------------- ------------------ ------------------ ------------------ ------------------
Net sales and revenues from continuing
 operations                                           $6,338            $9,346               $6,396              $6,788
Gross profit                                           2,073             1,938                2,226               2,120
Income (loss) from continuing operations                 217             2,088                 (283)               (252)
Net income (loss)                                        267             2,111                 (183)                 17
Income (loss) applicable to common shares                141             2,040                 (305)               (104)
-------------------------------------------------- ------------------ ------------------ ------------------ ------------------
Earnings (Loss) Per Common Share1:
Continuing operations                                     .05               .78                (.21)                (.19)
Net income (loss)                                         .07               .79                (.16)                (.05)
-------------------------------------------------- ------------------ ------------------ ------------------ ------------------
</TABLE>

1 The sum of earnings per share for the four quarters may not equal earnings per
share for the total year due to certain items in the diluted  earnings per share
calculation  for an  individual  quarter that were  anti-dilutive  for the total
year.

<PAGE>

<TABLE>
<CAPTION>

ANDERSEN GROUP, INC.
Consolidated Balance Sheets
February 28, 1999 and 1998
(in thousands, except share data)
                                                                                1999                      1998
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
<S>                                                                          <C>                       <C>

Assets
Current assets:
Cash and cash equivalents                                                    $ 2,541                   $ 2,516
Marketable securities                                                          6,014                     9,001
Receivable from sale of subsidiary                                                 -                     3,521
Accounts and other receivables, less allowance for doubtful
accounts of $110 in 1999, and $130 in 1998                                     4,098                     3,870
Inventories                                                                    7,821                     8,076
Prepaid expenses and other current assets                                        100                       142
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
Total current assets                                                          20,574                    27,126
Property, plant and equipment, net                                             9,305                     9,443
Prepaid pension expense                                                        5,033                     4,665
Investments                                                                      206                     1,815
Other assets                                                                   2,001                     1,722
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
                                                                             $37,119                   $44,771
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt                                        $    443                  $    595
Short-term borrowings                                                          2,356                     2,183
Accounts payable                                                                 659                       951
Accrued liabilities                                                            1,501                     3,352
Deferred income taxes                                                            582                     1,286
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
Total current liabilities                                                      5,541                     8,367
Long-term debt, less current maturities                                        3,729                     4,459
Subordinated note payable, net of unamortized discount                         7,329                     7,300
Other long-term obligations                                                    1,902                     1,888
Deferred income taxes                                                          2,189                     2,561
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
Total liabilities                                                             20,690                    24,575
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
Commitments and contingencies (Notes 18 and 21)
Stockholders' equity:
Cumulative convertible preferred stock, no par value;
  authorized 800,000 shares, outstanding 256,416 shares                        4,769                     4,769
Common stock, $.01 par value in 1999, no par value in 1998;
  authorized 6,000,000 shares, issued 1,958,478 shares in 1999
  and 1998                                                                        20                     2,103
Treasury stock, at cost, 30,549 shares in 1999, and 21,800
   shares in 1998                                                               (142)                      (82)
Receivable from officer                                                         (250)                        -
Additional paid-in capital                                                     5,339                     3,248
Retained earnings                                                              6,693                    10,158
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
Total stockholders' equity                                                    16,429                    20,196
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
                                                                             $37,119                   $44,771
------------------------------------------------------------------------- ----------------------- ----------------------- ----------
See accompanying notes to consolidated financial statements.

</TABLE>
<PAGE>

<TABLE>
<CAPTION>


ANDERSEN GROUP, INC.
Consolidated Statements of Operations
Years ended February 28, 1999, 1998 and 1997
 (in thousands, except per share data)

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

                                                                             1999                  1998                 1997
------------------------------------------------------- -------------------------- ----------------------- --------------------
Revenues:
Net sales                                                            $26,838                 $25,397                 $20,643
Investment income (loss) and other income                             (3,238)                  3,471                    (142)
------------------------------------------------------- -------------------------- ----------------------- --------------------
                                                                      23,600                  28,868                  20,501
------------------------------------------------------- -------------------------- ----------------------- --------------------
Costs and expenses:
Cost of sales                                                         18,255                  17,040                  13,259
Selling, general and administrative                                    6,170                   6,260                   5,772
Research and development                                               1,888                   1,444                   1,228
Interest expense                                                       1,735                   1,163                     790
------------------------------------------------------- -------------------------- ----------------------- --------------------
                                                                      28,048                  25,907                  21,049
------------------------------------------------------- -------------------------- ----------------------- --------------------
(Loss) income  from continuing operations
  before income taxes                                                 (4,448)                  2,961                    (548)
Income tax (benefit) expense                                          (1,484)                  1,191                    (882)
------------------------------------------------------- -------------------------- ----------------------- --------------------
(Loss) income  from continuing operations                             (2,964)                  1,770                     334
Income (loss) from discontinued Ultrasonics
  segment, net of income taxes (benefit) of
  $221 and ($22), respectively                                             -                     345                     (35)
(Loss) gain on sale of discontinued Ultrasonics
segment, net of income taxes (benefit) of
  ($71) and $84, respectively                                           (116)                     97                       -
------------------------------------------------------- -------------------------- ----------------------- --------------------
Net (loss) income                                                     (3,080)                  2,212                     299
Preferred dividends                                                     (385)                   (477)                   (411)
Reversal of preferred dividends                                            -                      37                     134
------------------------------------------------------- -------------------------- ----------------------- --------------------
(Loss) income applicable to common
  shareholders                                                       $(3,465)                $ 1,772                $     22
------------------------------------------------------- -------------------------- ----------------------- --------------------
Earnings (loss) per common share:
BASIC
  Continuing operations                                             $ (1.74)               $      .69              $    .03
  Discontinued operations                                                 -                       .18                  (.02)
  (Loss) gain on sale of discontinued segment                          (.06)                      .05                     -
------------------------------------------------------- -------------------------- ----------------------- --------------------
  (Loss) income per common share, basic                             $ (1.80)               $      .92              $    .01
------------------------------------------------------- -------------------------- ----------------------- --------------------
DILUTED
  Continuing operations                                             $ (1.74)               $      .68              $    .03
  Discontinued operations                                                 -                       .18                  (.02)
  (Loss) gain on sale of discontinued segment                          (.06)                      .05
                                                                                                           -
------------------------------------------------------- -------------------------- ----------------------- --------------------
  (Loss) income per common share, diluted                           $ (1.80)               $      .91              $    .01
------------------------------------------------------- -------------------------- ----------------------- --------------------
See accompanying notes to consolidated financial statements.

</TABLE>
<PAGE>

<TABLE>
<CAPTION>



ANDERSEN GROUP, INC.
Consolidated  Statements of Changes in Stockholders' Equity Years ended February
28, 1999, 1998 and 1997
 (in thousands, except share data)

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


                                                     1999                              1998                              1997
                                         Outstanding                      Outstanding                        Outstanding
                                               Shares     Amount              Shares         Amount             Shares        Amount
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
Preferred Stock
Beginning balance                          256,416      $  4,769                   -              -                  -             -
Reclassification due to removal of
  redemption provisions of preferred                                         256,416       $  4,769                  -            -
stock
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
                                           256,416      $  4,769             256,416       $  4,769                  -            -
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
Common Stock
 Beginning balance                       1,958,478      $  2,103           1,958,478       $  2,103          1,958,205     $  2,103
 Shares issued from prior                                                                                                         -
   conversion of preferred stock                                                   -              -                273
 Adjustment to reflect redomestication
and                                                       (2,083)                  -              -                  -            -
    new par value for common shares
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
                                         1,958,478      $       20         1,958,478       $  2,103          1,958,478     $  2,103
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
Additional Paid-in Capital
Beginning balance                                       $  3,248                           $  3,248                         $  3,248
Adjustment to reflect redomestication
and                                                        2,083                                  -                               -
   new par value for common shares
Net gain on issuances of treasury                              8                                  -                               -
shares
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
                                                        $  5,339                           $  3,248                        $  3,248
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
Retained Earnings
 Beginning balance                                       $10,158                           $  8,386                        $  8,364
 Net (loss) income                                        (3,080)                             2,212
                                                                                                                                299
 Preferred stock dividends and
   accretion                                                (385)                              (477)
                                                                                                                               (411)
 Reversal of preferred dividends and
   accretion                                                   -                                 37
                                                                                                                                134
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
                                                        $  6,693                            $10,158                        $  8,386
---------------------------------------- -------------- ----------------- --------------- ------------------ -------------  --------
Receivable from Officer
 Beginning balance                                             -                                  -                                -
 Receivable pursuant to officer's
purchase                                                $ (   250)                                -                                -
    of common stock
---------------------------------------- -------------- ----------------- --------------- ------------------ ----------------- -----
                                                        $ (   250)                                -                                -
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
Treasury Stock
 Beginning balance                          21,800        $      (82)         24,000       $      (90)          24,000         $
                                                                                                                                (90)
 Shares issued                             (20,772)                78         (2,200)             8                  -             -
 Shares issued  to officer                 (62,500)          250
 Treasury shares purchased                  92,021          (388)                  -              -                  -             -
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
                                            30,549      $    (142)            21,800      $      (82)           24,000         $
                                                                                                                                (90)
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
Total stockholders' equity                               $16,429                            $20,196                          $13,647
---------------------------------------- -------------- ----------------- --------------- ------------------ ------------- ---------
See accompanying notes to consolidated financial statements.

</TABLE>



<PAGE>


<TABLE>
<CAPTION>

ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
Years ended February 28, 1999, 1998 and 1997
(in thousands)

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

                                                                          1999                  1998                 1997
-------------------------------------------------------------------- ---------------------- -------------------- -------------------
Cash flows from operating activities:
Net (loss) income                                                       $(3,080)              $ 2,212              $   299
Adjustments  to  reconcile  net  (loss)  income  to net cash  used in  operating
activities:
Depreciation, amortization and accretion                                  1,434                 1,480                1,419
Deferred income taxes                                                    (1,076)                1,016                   67
Loss (gain) on sale of Ney Ultrasonics                                      116                   (97)                   -
Losses (gains) from securities and investments                            4,547                (2,619)               1,149
Purchases of securities                                                  (1,836)               (2,218)              (1,625)
Proceeds from sales of securities                                         1,885                 1,230                  526
Pension income                                                             (368)                 (391)                (247)
(Gain) loss on disposal of property, plant and equipment                    (25)                    -                   58
Investment in Digital GraphiX                                                 -                     -                  (87)
Changes in  operating  assets and  liabilities,  net of changes from sale of Ney
Ultrasonics in 1998:
Accounts and other receivables                                             (228)               (2,048)               1,564
Inventories                                                                 255                  (386)                (428)
Prepaid expenses and other assets                                            57                   (97)                (339)
Accounts payable                                                           (292)                  507               (1,799)
Accrued liabilities and other long-term obligations                      (1,273)               (1,105)                (930)
-------------------------------------------------------------------- ---------------------- -------------------- -------------------
  Net cash provided by (used in) operating activities                       116                (2,516)                (373)
-------------------------------------------------------------------- ---------------------- -------------------- -------------------
Cash flows from investing activities:
Proceeds from sale of Ultrasonics segment                                 2,800                     -                    -
Proceeds from sale of property, plant and equipment                         223                     -                    4
Purchase of property, plant and equipment                                (1,702)               (1,740)              (1,191)
Purchase of investments                                                       -                (1,225)                   -
Proceeds from collection of investments                                       -                 1,542                    -
-------------------------------------------------------------------- ---------------------- -------------------- -------------------
  Net cash provided by (used in) investing activities                     1,321                (1,423)              (1,187)
-------------------------------------------------------------------- ---------------------- -------------------- -------------------
Cash flows from financing activities:
Principal payments on long-term debt                                       (882)               (2,760)              (1,250)
Proceeds from issuance of subordinated debt                                   -                 7,500                    -
Redemptions of preferred stock                                                -                  (160)                (392)
Proceeds (payment) of short-term borrowings, net                            173                  (122)               2,305
Stock options exercised                                                      50                     -                    -
Treasury shares purchased, net                                             (352)                    -                    -
Preferred dividends paid                                                   (401)               (1,222)                   -
-------------------------------------------------------------------- ---------------------- -------------------- ---------------
 Net cash (used in) provided by financing activities                     (1,412)                3,236                  663
-------------------------------------------------------------------- ---------------------- -------------------- ---------------
 Net increase (decrease) in cash and cash equivalents                        25                  (703)                (897)
 Cash and cash equivalents, beginning of year                             2,516                 3,219                4,116
-------------------------------------------------------------------- ---------------------- -------------------- ---------------
 Cash and cash equivalents, end of year                                 $ 2,541              $  2,516             $  3,219
-------------------------------------------------------------------- ---------------------- -------------------- ---------------
See accompanying notes to consolidated financial statements.

</TABLE>
<PAGE>




Andersen Group, Inc.
Notes to Consolidated Financial Statements
Years ended February 28, 1999, 1998 and 1997

(1)    Nature of Business

Andersen  Group,  Inc.  (the  Company) is a  diversified  holding  company which
invests in both marketable and illiquid securities of domestic and foreign-based
companies.  It also owns a  consolidated  subsidiary,  The J.M.  Ney Company (JM
Ney), which manufactures  electronic  connectors,  components and precious metal
materials for sale to the  automotive,  defense,  semiconductor  and medical and
dental markets.

(2)    Summary of Significant Accounting Policies

Use of Estimates

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  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.

Principles of Consolidation

The Company's  financial  statements include the accounts of the Company and its
wholly  owned  subsidiaries.   All  significant  intercompany  transactions  and
balances have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash  equivalents  include funds held in  investments  with an original
maturity of three months or less.

Marketable Securities

The Company's marketable  securities are carried as trading securities at market
value in accordance  with Statement of Financial  Accounting  Standards No. 115,
"Accounting for Certain  Investments in Debt and Equity  Securities" (SFAS 115).
The Company has established a valuation  allowance to provide for volatility and
liquidity  concerns  relating  to its  investments  in Russia and other  Eastern
European countries.  Any changes in the valuation of the portfolio are reflected
in the accompanying Consolidated Statements of Operations.

Inventories

Inventories are stated at the lower of cost or market.  Cost is determined using
the last-in,  first-out  (LIFO) method for precious metals and at standard costs
which  approximate the first-in,  first-out  (FIFO) and average cost methods for
the balance of the inventories.


Property, Plant and Equipment

Property, plant and equipment,  including capital leases, are stated at cost and
depreciated using the straight-line method over the estimated useful life of the
respective assets, as follows:

       Buildings and improvements                                   10-50 years
       Machinery and equipment                                       5-10 years
       Furniture and fixtures                                        3-10 years

Unamortized Discounts

Unamortized  discounts on  subordinated  notes  payable are  accreted  using the
effective interest method.

Income Taxes

Income taxes are determined using the asset and liability approach.  This method
gives  consideration  to the future tax  consequences  of temporary  differences
between  the  carrying  amounts and the tax basis of assets and  liabilities  at
currently enacted tax rates.

Earnings Per Share

In  accordance  with  Statement  of  Financial  Accounting  Standards  No. 128 -
"Earnings Per Share" (SFAS 128), basic 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 plus the assumed  issuance of common  shares for all  potentially
dilutive securities. See Note 14 for additional information and a reconciliation
of the basic and diluted earnings per share computations.

Inventory Hedging

The Company has entered into precious metal forward contracts as a hedge against
precious metal fluctuations for firm price deliveries. These contracts limit the
Company's  exposure to both  favorable  and  unfavorable  precious  metals price
fluctuations. Gains or losses on these contracts are recognized when the product
deliveries  being  hedged have been made.  The Company  also  utilizes  precious
metals leasing and deferred  payment  purchases of precious metals to manage the
price exposure of certain components of its inventory.

Financial Statement Presentation

Certain   reclassifications  have  been  made  to  the  prior  years'  financial
statements in order to conform with the FY99 presentation.


<TABLE>
<CAPTION>

(3)      Marketable Securities

Marketable securities consist of the following (in thousands):

<S>                                                                 <C>                          <C>

                                                                 February 28, 1999            February 28, 1998
--------------------------------------------------------------- ------------------------- -------------------------- --
Common stock of savings banks                                          $5,362                       $5,611
FM Emerging Russia Fund                                                   294                        2,422
Portfolio of Ukraine stocks                                               108                          314
Common stock of Bank Handlowey                                            217                          348
Renaissance Russia Bond Fund                                               98                            -
Valuation reserve - foreign investments                                   (65)                        (617)
Common stock of Centennial Cellular                                         -                          430
Municipal bonds                                                             -                          493
--------------------------------------------------------------- ------------------------- -------------------------- --
                                                                       $6,014                       $9,001
--------------------------------------------------------------- ------------------------- -------------------------- --

</TABLE>

<TABLE>
<CAPTION>

(4)    Inventories

Inventories consist of the following (in thousands):
<S>                                                               <C>                        <C>


                                                                  February 28, 1999         February 28, 1998
  --------------------------------------------------------------- ------------------------- ---------------------------
  Raw material                                                          $ 3,498                    $ 2,989
  Work in process                                                         4,661                      6,509
  Finished goods                                                          2,710                        657
  ------------------------------------------------------------ ------------------------- ---------------------------
                                                                         10,869                     10,155
  Less LIFO Reserve                                                       3,048                      2,079
  ------------------------------------------------------------ ------------------------- ---------------------------
                                                                        $ 7,821                    $ 8,076
  ------------------------------------------------------------ ------------------------- ---------------------------

</TABLE>
At February 28, 1999 and 1998, inventories valued at LIFO cost comprised 76% and
79% of total inventories, respectively. At February 28, 1999, inventories valued
at LIFO  consisted  of 9,565 troy ounces of gold,  11,817 troy ounces of silver,
3,396  troy  ounces of  platinum  and  14,086  troy  ounces of  palladium.  Such
quantities  of precious  metals are net of 400 ounces of  palladium  held by the
Company's primary operating subsidiary,  JM Ney, subject to leasing arrangements
with the precious metals division of JM Ney's primary bank.

(5)    Discontinued Operations

Ney Ultrasonics Inc.

Effective  February 28, 1998, the Company sold the net assets of Ney Ultrasonics
Inc. for an amount which at February 28, 1998 was estimated to be  approximately
$3,521,000. As a result, during FY98 the Company recorded a gain of $97,000, net
of expenses  relating  to the  transaction  and net of income  taxes of $84,000.
During FY99, the Company and the purchaser of the business  reached a settlement
agreement  to resolve  disputes  relating to the  determination  of the purchase
price.  Under this  settlement,  the Company  received  $400,000  of  additional
consideration beyond the $2,400,000 it had received at closing. This settlement,
net of expenses incurred in excess of previous  accruals,  resulted in a current
year loss of $187,000  before related tax benefits.  The Company also expects to
receive additional consideration, which is contingent on the growth of the sales
of products and technology transferred as part of the sale.

Ney  Ultrasonics'  results of  operations  have been  presented as  discontinued
operations.  Revenue  from the  segment  totaled  approximately  $5,713,000  and
$3,874,000 in FY98 and FY97, respectively.
<TABLE>
<CAPTION>

(6)    Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):
<S>                                                    <C>                               <C>

                                                        February 28, 1999                  February 28, 1998
------------------------------------------------------- ---------------------------- ------------------------------
Land and improvements                                           $ 1,056                         $ 1,056
Buildings and improvements                                        9,308                           9,392
Machinery and equipment                                          11,494                          10,539
Furniture and fixtures                                              873                             867
------------------------------------------------------- ---------------------------- ------------------------------
                                                                 22,731                          21,854
Less accumulated depreciation and
  amortization                                                   13,426                          12,411
------------------------------------------------------- ---------------------------- ------------------------------
                                                                $ 9,305                         $ 9,443
------------------------------------------------------- ---------------------------- ------------------------------
</TABLE>

Depreciation and amortization expense was $1,350,000,  $1,405,000 and $1,393,000
in FY99, FY98 and FY97, respectively.

At February 28, 1999 and 1998,  property,  plant and equipment includes $579,000
and $1,146,000,  respectively, of machinery and equipment acquired under capital
leases,  which expire through FY02,  with related  accumulated  amortization  of
$268,000 and $728,000, respectively.

(7)      Investments

Investments consist of the following (in thousands):
                                            February 28, 1999  February 28, 1998
------------------------------------------ ------------------- -----------------
Investment in Institute for Automated
Systems                                     $   84                   $    835
Investment in VSMPO                            122                        980
------------------------------------------ ------------------- -----------------
                                           $   206                   $  1,815
------------------------------------------ ------------------- -----------------

At  February  28,  1999,  the  Company  had an  investment  with a cost basis of
$835,000 in a joint venture, which has an equity investment in the Institute for
Automated  Systems,  a  Russian  telecommunications  company  that has  plans to
develop a data  transmission  network  throughout  Russia.  Two of the Company's
directors are among a group of investors in this joint venture.

During FY98, the Company invested  approximately  $1,225,000 in the common stock
of AVISMA, a Russian titanium producer which was subsequently merged into VSMPO,
a Russian titanium processing  company.  Three of the Company's directors and an
investment  fund  controlled  by one of these  directors  are also  investors in
VSMPO.

These two  investments,  which  the  Company  intends  to hold long term and are
recorded using the cost basis method of  accounting,  were written down in value
during FY99 to reflect other than  temporary  impairments in their values due to
significant declines in the market values of Russian securities.

(8)      Short-term Borrowings

J.M.  Ney  has a $6.0  million  revolving  credit  and  deferred  payment  sales
agreement  with  a  commercial   bank.  At  February  28,  1999,   $964,000  was
outstanding. The facility is secured by substantially all of JM Ney's assets. At
JM Ney's  discretion,  interest is charged at the bank's  prime rate,  which was
7.75% and 8.5% at  February  28, 1999 and 1998,  respectively,  or at LIBOR plus
1.75% if the  borrowing  is fixed  for a period  of time,  or at 1.75%  over the
bank's  precious metals leasing rate if the borrowing is represented by deferred
payment  purchases of precious  metals.  A fee of 0.25% is charged on the unused
balance of the facility.  This  agreement  includes  restrictive  covenants that
limit the amount of dividends and  distributions  from JM Ney to the Company and
which require JM Ney to maintain a specified amount of stockholders'  equity. At
February  28,  1999 the amount of net assets  which JM Ney was  restricted  from
distributing to the Company totaled approximately $11,125,000.

In addition,  at February 28,  1999,  the Company had a $1,392,000  demand loan,
which  was  secured  by a  portion  of the  Company's  portfolio  of  marketable
securities. Interest on this borrowing was charged at a floating rate, which was
5.8% at February 28, 1999.

(9)    Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


<PAGE>

<TABLE>
<CAPTION>






                                                   February 28, 1999                   February 28, 1998
---------------------------------------- ------------------------------------ -------------------------------------
<S>                                               <C>                                  <C>

Employee compensation                                   $   430                            $    449
Accrued dividends                                            96                                 112
Income taxes                                                  -                                 201
Accrued interest                                            276                                 314
Deferred hedging gains                                      165                                 346
Other                                                       534                               1,930
---------------------------------------- ------------------------------------ -------------------------------------
                                                        $ 1,501                             $ 3,352
---------------------------------------- ------------------------------------ -------------------------------------
</TABLE>

<TABLE>
<CAPTION>

(10)   Long-term Debt and Subordinated Notes Payable

Long-term  debt and  subordinated  notes  payable  consist of the  following (in
thousands):


                                                                              February               February
                                                                              28, 1999               28, 1998
---------------------------------------------------------------------- ---------------------- ---------------------- --
<S>                                                                             <C>                  <C>

Convertible  subordinated  debentures,  due  October  2007;  interest  at 10.5%,
  payable semi-annually; annual principal payments in varying amounts
  through maturity; unsecured                                                    $ 3,759                 $ 4,311
Subordinated note payable of JM Ney due
  December 2004; unsecured; quarterly interest
  payments at 10.26%                                                               7,500                   7,500
Other                                                                                413                     743
---------------------------------------------------------------------- ---------------------- ---------------------- --
                                                                                  11,672                  12,554
Less unamortized discount on subordinated
  note payable                                                                       171                     200
---------------------------------------------------------------------- ---------------------- ---------------------- --
                                                                                  11,501                  12,354
Less current maturities                                                              443                     595
---------------------------------------------------------------------- ---------------------- ---------------------- --
                                                                                 $11,058                 $11,759
---------------------------------------------------------------------- ---------------------- ---------------------- --
</TABLE>

The terms of the 2007  convertible  subordinated  debentures call for the annual
redemption  of   approximately   $431,000  of  principal.   The  debentures  are
convertible  into  common  stock of the  Company at any time prior to  maturity,
unless  previously  redeemed,  at $16.17 per share,  subject to adjustment under
certain  conditions.  At February 28, 1999,  232,468 shares of common stock were
reserved for conversion.

In connection with the issuance of the subordinated note payable,  JM Ney issued
warrants  to the  lender to  acquire  34,000  shares of its  common  stock at an
exercise price of $1.00 per share,  and 6,000 warrants with an exercise price of
$10.00 per share.  The value of these warrants is being  amortized over the life
of the note.  The lender has an option to put these  warrants  back to JM Ney at
the earlier of  December  2002 or the date of an initial  public  offering of JM
Ney's Common Stock on terms as defined in the agreement.

Maturities  of  long-term  debt for  each of the  next  five  fiscal  years  and
thereafter are as follows (in thousands):

                                 2000                    $      443
                                 2001                           538
                                 2002                           543
                                 2003                           439
                                 2004                           440
                              Thereafter                      9,269
                                                           $ 11,672
<TABLE>
<CAPTION>

(11)   Income Taxes

For FY99, FY98 and FY97, income tax expense (benefit)  consists of the following
(in thousands):

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


                                                                 1999              1998                   1997
--------------------------------------------------------- ------------------- -------------------- ---------------------
Current Federal                                             $    (377)          $    350              $   (410)
Current State                                                    (102)               130                  (561)
Deferred Federal                                                 (977)               940                    62
Deferred State                                                    (99)                76                     5
--------------------------------------------------------- ------------------- -------------------- ---------------------
                                                             $ (1,555)           $ 1,496              $   (904)
--------------------------------------------------------- ------------------- -------------------- ---------------------
</TABLE>

The  difference  between the actual income tax (benefit)  expense and the income
tax (benefit) expense computed by applying the statutory Federal income tax rate
of 34% to income  (loss)  before  taxes is  attributable  to the  following  (in
thousands):


<TABLE>
<CAPTION>


                                                                   1999               1998                   1997
--------------------------------------------------------- ----------------- ----------------------- ---------------------
<S>                                                             <C>                 <C>

Income tax (benefit) expense                                  $ (1,576)              $ 1,261               $ (206)
State income taxes, net of Federal benefit                        (132)                  206                  107
Change in enacted tax rates                                          -                     -                 (264)
Adjustment of accrual for prior years' taxes                         -                     -                 (546)
Other                                                              153                    29                    5
--------------------------------------------------------- ----------------- ----------------------- ---------------------
                                                              $ (1,555)              $ 1,496               $ (904)
--------------------------------------------------------- ----------------- ----------------------- ---------------------
</TABLE>

During FY97, the Company  settled a state income tax audit covering FY89 through
FY96. This settlement is the primary reason for the $546,000 benefit  adjustment
of accrual for prior years' taxes reported in the above reconciliation.

The  principal  components  of the net  deferred  tax  asset  (liability)  as of
February 28, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                                       <C>                      <C>
                                                                              1999                     1998
                                                                        -----------              ----------
Deferred tax liabilities:
Fixed asset basis differences                                            $ (1,273)                $ (1,229)
Inventory                                                                  (1,314)                  (1,486)
Pension                                                                    (1,940)                  (1,726)
Unrealized gains on marketable securities, net                                  -                     (470)
Installment sale                                                                -                      (30)
---------------------------------------------------------------- -------------------------- --------------------------
Total deferred tax liabilities                                             (4,527)                  (4,941)
---------------------------------------------------------------- -------------------------- --------------------------
Deferred tax assets:
Post-retirement benefits other than pensions                                   406                      395
Unrealized losses on marketable securities, net                                361                        -
Allowance for uncollectible receivables                                         42                       48
Federal credit carry-forwards                                                  618                      337
Other                                                                          329                      314
---------------------------------------------------------------- -------------------------- --------------------------
Total deferred tax assets                                                    1,756                    1,094
---------------------------------------------------------------- -------------------------- --------------------------
Net deferred tax liabilities                                              $ (2,771)                $ (3,847)
---------------------------------------------------------------- -------------------------- --------------------------

</TABLE>

At February 28, 1999 and 1998 the Company recorded no valuation  allowance.  The
Company  believes  that it is more  likely  than not  that  the sale of  certain
assets,   investment  securities  and  certain  real  property,   will  generate
sufficient  income to fully  utilize its  deferred  tax assets.  At February 28,
1999,  the Company had $618,000 of Federal  credit  carry-forwards,  $172,000 of
which were  attributable to the alternative  minimum tax that have no expiration
date. The remaining credits, totaling $446,000, expire from 2000 through 2002.

(12)   Series A Cumulative Convertible Preferred Stock

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 a fixed annual  dividend  rate of $1.50 per  preferred  share and to
eliminate the mandatory redemption feature of the Preferred Stock. Prior to this
modification,  quarterly  dividend  payments,  ranging from $.1875 to $.4375 per
share,  were  accrued  based upon the  operating  income of JM Ney,  as defined.
Approximately  $1.69 and $1.24 per  preferred  share of  dividends  were accrued
during FY98 and FY97, respectively.

During  FY98  and  FY97,  the  Company   purchased   8,776  and  24,283  shares,
respectively,  of its Preferred Stock at $18.25 per share in FY98, and at $16.15
per share in FY97. As a result of the purchases,  the Company  reversed  accrued
dividends  and  accreted  discounts  of $37,000  and  $134,000 in FY98 and FY97,
respectively.

During FY98 and FY97 approximately  $40,000 and $58,000;  respectively,  of
the  accretion of a discount  were  recorded as part of the  preferred  dividend
requirement.

The preferred shares are convertible into the Company's common stock at any time
at a rate of 1.935 shares of common stock for each preferred  share. At February
28, 1999, 496,165 shares of common stock have been reserved for conversion.

(13)     Common Stock

During FY99, the Company's shareholders approved a change of the Company's state
of incorporation from Connecticut to Delaware.  Among the impacts of this change
in domicile was the change from a no par value common stock to common stock with
a  par  value  of  $.01  per  share.  Accordingly,  the  accompanying  financial
statements  reflect  the  adjustment  of the par value of the  common  stock for
issued and outstanding  shares with a  corresponding  adjustment to the value of
additional paid-in capital.

(14)     Earnings Per Share

The  computation  of basic and  diluted  earnings  per share is as  follows  (in
thousands, except per share amounts):

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

                                                                       1999                 1998             1997
---------------------------------------------------------------- ------------------ ------------------ ----------------
Numerator for basic and diluted earnings per share:
(Loss) income applicable to common shareholders                      $(3,465)            $ 1,772           $    22
---------------------------------------------------------------- ------------------ ------------------ ----------------
Denominator for basic earnings per share:
Weighted average shares                                                1,928               1,935             1,934
Effect of dilutive securities - stock options                              -                  18                 -
---------------------------------------------------------------- ------------------ ------------------ ----------------
Denominator for diluted earnings per share                             1,928               1,953             1,934
---------------------------------------------------------------- ------------------ ------------------ ----------------
Basic earnings per share                                           $  (1.80)             $    .92          $   .01
Diluted earnings per share                                         $  (1.80)             $    .91          $   .01
---------------------------------------------------------------- ------------------ ------------------ ----------------
</TABLE>
For each of FY99,  FY98 and FY97,  the effects of the  conversion  of  Preferred
Stock or the 10 1/2% Debentures  have been excluded  because the impacts of such
conversions would have been antidilutive.

(15)   Stock Option Plans

The  Company's  and JM Ney's  incentive  stock option  plans  provide for option
grants to  directors  and key  employees at prices equal to at least 100% of the
stock's fair market value at date of grant.  The per share weighted average fair
value of stock options granted during FY99, FY98 and FY97 under these plans were
$4.06,  $6.22 and $3.90,  respectively,  using the Black Scholes  option pricing
model with the following weighted average  assumptions:  expected dividend yield
of 0%; risk-free  interest rates of 6.0%, 6.5%, and 6.5%;  expected life of five
to seven years; and expected volatility of 33.3%.

The Company has adopted the disclosure  provisions of SFAS No. 123,  "Accounting
for Stock-Based  Compensation".  Accordingly,  no compensation  expense has been
recognized for the stock option plans. Had  compensation  cost for the Company's
stock option plans, including the JM Ney plan, been determined based on the fair
value on the grant date for awards during FY99,  FY98 and FY97  consistent  with
the provisions of SFAS No. 123, the Company's net earnings  applicable to common
shares,  and earnings per share would have been reduced to the pro forma amounts
indicated below (amounts in thousands, except per share data):

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

                                                                             1999             1998          1997
(Loss) income applicable to common shareholders:
As reported                                                               $(3,465)         $ 1,772       $    22
 Pro forma                                                                $(3,695)         $ 1,581       $   (68)
(Loss) earnings per share - diluted:
 As reported                                                             $  (1.80)       $   .91        $    .01
 Pro forma                                                               $  (1.92)       $   .81         $  (.03)

</TABLE>
The Company  reserved  139,000  shares of common stock for the exercise of stock
options.  At February 28, 1999,  the Company had 43,100  options  available  for
issuance under the plan. JM Ney has reserved  150,000 shares of its common stock
for the exercise of stock options, of which 7,200 were available for issuance at
February 28, 1999.

Activity under the Company's plan, which includes an expired plan, but excluding
J.M. Ney's plan, was as follows:

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

                                                Number               Weighted Average                Range of
          Outstanding Options                  Of Shares              Exercise Price              Exercise Prices
----------------------------------------- -------------------- ------------------------------ ------------------------
Balance at February 29, 1996                     39,700                     $7.77                 $6.50 - $9.38
Granted                                          75,000                     $4.29                 $3.81 - $6.13
Canceled                                        (13,000)                    $7.50                 $3.81 - $9.38
----------------------------------------- -------------------- ------------------------------ ------------------------
Balance at February 28, 1997                    101,700                     $5.02                 $3.81 - $8.38
Exercised                                        (2,200)                    $3.81                 $3.81
Canceled                                        (20,300)                    $5.43                 $3.81 - $7.00
----------------------------------------- -------------------- ------------------------------ ------------------------
----------------------------------------- -------------------- ------------------------------ ------------------------
Balance at February 28, 1998                     79,200                     $5.02                 $3.81 - $8.38
Granted                                          37,000                     $6.30                 $6.25 - $6.44
Exercised                                       (10,700)                    $4.54                 $3.81 - $5.38
Canceled                                        (11,500)                    $6.76                 $3.81 - $7.50
----------------------------------------- -------------------- ------------------------------ ------------------------
----------------------------------------- -------------------- ------------------------------ ------------------------
Balance at February 28, 1999                     94,000                     $5.31                 $3.81 - $8.38
----------------------------------------- -------------------- ------------------------------ ------------------------

</TABLE>


<PAGE>


At February 28,  1999,  the range of exercise  prices and the  weighted  average
remaining contractual life of the options was as follows:
<TABLE>
<S>                      <C>                 <C>               <C>                  <C>            <C>

                           Options Outstanding                                                      Options Exercisable
                                                              Weighted Average                         Weighted
  Range of Exercise                      Weighted Average        Remaining                              Average
       Prices               Number        Exercise Price      Contractual Life         Number       Exercise Price
                         Outstanding                                                Exercisable
---------------------- ----------------- ------------------ --------------------- ----------------- ----------------
  $8.38                       6,000            $8.38             2.3 years              6,000            $8.38
  $7.00 - $5.38              46,000            $6.27             8.2 years              9,000            $6.13
  $3.81                      42,000            $3.81             7.1 years             42,000            $3.81
---------------------- ----------------- ------------------ --------------------- ----------------- ----------------
                             94,000            $5.31             7.3 years             57,000            $4.66
---------------------- ----------------- ------------------ --------------------- ----------------- ----------------
</TABLE>

Also, during FY99, FY98 and FY97, options to purchase 4,250,  16,800 and 130,000
shares of JM Ney, at average  exercise  prices of $11.47,  $10.86 and $10.00 per
share, respectively, were issued. During FY99 and FY98, options to acquire 7,750
and 500 shares,  respectively,  of JM Ney at $10.00 per share were forfeited. At
February 28, 1999,  87,974 of the 142,800 total  outstanding JM Ney options were
exercisable.  At February 28, 1999,  the Company  owned all 850,000  outstanding
shares of JM Ney. There presently is no public market for JM Ney's common stock.

(16)   Retirement Plans

The  Company  maintains  both   noncontributory   defined  benefit  and  defined
contribution   plans,  which  collectively  cover  substantially  all  full-time
employees.   The  defined   contribution   plans  are  funded  annually  through
contributions  in amounts that can be deducted for Federal  income tax purposes.
Benefits   payable  under  all  plans  are  based  upon  years  of  service  and
compensation levels.

The following  table sets forth the changes in benefit  obligations,  changes in
fair  value of plan  assets,  funded  status and net  amount  recognized  in the
Consolidated Balance Sheets (in thousands).

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

                                                                1999                1998                  1997
----------------------------------------------------- ---------------------- --------------------- -------------------
Changes in Benefit Obligations
Benefit obligation at beginning of year                        $10,212               $10,021             $10,062
Service cost                                                       240                   234                 253
Interest cost                                                      781                   736                 723
Experience loss                                                    842                   243                   -
Distributions                                                   (2,885)               (1,022)             (1,017)
Effect of curtailment                                              (64)                    -                   -
Effect of early retirement program
  settlement                                                       511                     -                   -
Effect of assumption changes                                     2,026                     -                   -
----------------------------------------------------- ---------------------- --------------------- -------------------
Benefit obligation end of year                                  11,663                10,212              10,021
----------------------------------------------------- ---------------------- --------------------- -------------------

</TABLE>
<PAGE>


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


Change in Fair Value of Plan
  Assets
Fair value of plan assets at beginning of
  year                                                          18,087                16,815              15,642
Actual return on assets                                           (672)                2,294               2,190
Benefits paid                                                   (2,885)               (1,022)             (1,017)
----------------------------------------------------- ---------------------- --------------------- -------------------
Fair value of plan assets at end of
  year                                                          14,530                18,087              16,815
----------------------------------------------------- ---------------------- --------------------- -------------------
Funded status                                                    2,867                 7,875               6,794
Unrecognized net actuarial loss (gain)                           2,277                (3,079)             (2,379)
Unrecognized past service cost                                    (111)                 (131)               (141)
----------------------------------------------------- ---------------------- --------------------- -------------------
Prepaid pension expense                                        $ 5,033               $ 4,665             $ 4,274
----------------------------------------------------- ---------------------- --------------------- -------------------

For FY99,  FY98 and FY97, the projected  benefit  obligations and pension income
were determined using the following assumptions:

                                                                 1999                1998                 1997
                                                                              -------------------- -------------------
--------------------------------------------------------- -------------------
Discount rate                                                    7.0%                7.5%                 7.5%
Future compensation growth rate                                  5.0%                5.5%                 5.5%
Long-term rate of return on plan assets                          8.0%                8.0%                 8.0%

Net pension income for the Company's  funded defined benefit plan for FY99, FY98
and FY97 includes the following components (in thousands):

                                                                    1999                  1998               1997
------------------------------------------------------------- -------------------- ----------------- ------------------
Service cost of benefits accrued                                $    240             $     234           $    253
Interest cost on projected benefit obligations                       781                   736                723
Expected return on plan assets                                    (1,413)               (2,294)            (2,190)
Unrecognized net (loss) gain                                         (42)                  933                967
Effect of early retirement program                                   139                     -                  -
Effect of Ultrasonics curtailment                                    (73)                    -                  -
------------------------------------------------------------- -------------------- ----------------- ------------------
Pension (income)                                                $   (368)             $   (391)           $  (247)
------------------------------------------------------------- -------------------- ----------------- ------------------
</TABLE>

Pension  expense  for all  defined  contribution  plans  totaled  $189,000,
$122,000 and $121,000 in FY99, FY98 and FY97, respectively.

(17)   Post-retirement Benefit Obligations

During FY93,  the Company  amended its retiree  health care plan to include only
those retirees  currently in the plan and  discontinued  the benefit for current
employees. The Company's cost of its unfunded retiree health care plan for FY99,
FY98, and FY97 was approximately  $18,000,  $56,000, and $53,000,  respectively,
including  interest.  At February  28, 1999 and 1998,  the  accumulated  benefit
obligation for post-retirement benefits was approximately $769,000 and $803,000,
respectively.  At February 28, 1999, 31 retirees were  receiving  benefits under
this plan. The  accumulated  benefit  obligation  was determined  using the unit
credit method and assumed discount rates of 7.25% at February 28, 1999, 1998 and
1997. At February 28, 1999,  1998 and 1997, the accumulated  benefit  obligation
was  compiled  using  assumed  health  care cost trend  rates of 8%, 9% and 10%,
respectively,  gradually  declining  to 6% for the  remainder  of the  projected
payout period of the benefits.

The estimated effect on the present value of the accumulated  benefit obligation
at March 1, 1999 of a 1%  increase  each year in the health care cost trend rate
used  would  result in an  estimated  increase  of  approximately  $3,000 in the
service and interest cost, and approximately  $43,000 in the accumulated benefit
obligation.  A 1% decrease  each year in the health care trend rate would result
in a decrease of  approximately  $3,000 in the service and interest costs, and a
decrease of approximately $39,000 in the accumulated benefit obligation.

(18)   Leases

The Company leases  various  manufacturing  and office  facilities and equipment
under operating lease  agreements  expiring  through December 2004. In addition,
the  Company  earns  rental  income from office  space  leased to tenants  under
operating  leases expiring  through  November 2000.  Lease expense was $299,000,
$264,000,  and $209,000 for FY99,  FY98,  and FY97,  respectively,  while rental
income  totaled  $482,000,  $376,000  and  $342,000  for FY99,  FY98,  and FY97,
respectively.

Future  minimum  lease  payments and rental income under the terms of the leases
for each of the years ending February 28/29, are as follows (in thousands):

                                  Lease Payments                  Rental Income

         2000                               253                            256
         2001                               185                            104
         2002                               176                              -
         2003                               174                              -
         2004                               148                              -
         Thereafter                          76                              -

(19)   Business Segments and Export Sales

During FY99, the Company operated in two continuing segments, Electronics, which
comprises the operations of JM Ney, and Corporate,  which includes the Company's
investment, real estate and corporate administrative activities. Ney Ultrasonics
was discontinued in FY98.  Operating income consists of net sales,  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 a  specific  segment.  Corporate  identifiable  assets  include
marketable  securities  and  short-term  investments,  and assets  not  directly
attributable to JM Ney, or a specific segment.



<PAGE>


Summarized  financial  information  for  business  segment  is  as  follows  (in
thousands):

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

                                                                    FY99               FY98                FY97
  Net sales and revenues:
    Electronics                                                  $26,837            $25,397             $20,643
    Corporate                                                     (3,237)             3,471                (142)
                                                            ------------------ ------------------- --------------------
                                                                 $23,600            $28,868             $20,501
                                                            ------------------ ------------------- --------------------
  Operating income (loss):
    Electronics                                                 $  2,558           $  2,860            $  2,598
    Corporate                                                     (5,271)             1,264              (2,356)
                                                            ------------------ ------------------ ---------------------
                                                                $ (2,713)          $  4,124           $     242
                                                            ------------------ ------------------- --------------------
  Interest expense:
    Electronics                                                 $  1,228          $     468          $       13
    Corporate                                                        507                695                 777
                                                            ------------------ ------------------- --------------------
                                                                $  1,735           $  1,163           $     790
                                                            ------------------ ------------------- --------------------
  Identifiable assets:
    Electronics                                                  $25,900            $25,337             $22,467
    Ultrasonics                                                        -                  -               1,798
    Corporate                                                     11,219             19,434              13,412
                                                            ------------------ ------------------- --------------------
                                                                 $37,119            $44,771             $37,677
                                                            ------------------ ------------------- --------------------
  Depreciation, amortization and accretion:
    Electronics                                                 $  1,277           $  1,126            $  1,142
    Ultrasonics                                                        -                139                  95
    Corporate                                                        157                215                 240
                                                            ------------------ ------------------- --------------------
                                                                $  1,434           $  1,480            $  1,477
                                                            ------------------ ------------------- --------------------
  Capital expenditures:
    Electronics                                                 $  1,680           $  1,597            $  1,512
    Ultrasonics                                                        -                109                 234
    Corporate                                                         22                 34                  24
                                                            ------------------ ------------------- --------------------
                                                                $  1,702           $  1,740            $  1,770
                                                            ------------------ ------------------- --------------------
</TABLE>

Export  sales for  FY99,  FY98 and FY97 were  $4,303,000,  $4,370,000,  and
$3,417,000,  respectively. Such sales were made primarily to customers in Europe
and the Pacific Rim.

During FY99, sales to two customers  accounted for 16.1% and 13.9% of net sales,
while  during  FY98  these two  customers  accounted  for 14.9% and 12.6% of net
sales. No customer accounted for greater than 10% of net sales in FY97.

(20)   Estimated Fair Value of Financial Instruments

The carrying amount of cash and cash  equivalents,  accounts  receivable,  short
term borrowings,  accounts payable and other accrued  liabilities are reasonable
estimates of their fair value based upon their current maturities.  The carrying
value of marketable  securities  approximates fair value as determined by quoted
market prices.

At February 28, 1999,  gains  totaling  $165,000 from expired or sold  palladium
futures  contracts  have  been  deferred  from  income   recognition  until  the
underlying  orders for which the futures  contracts  served as a hedge have been
shipped. At February 28, 1999, there were no open futures contracts.

The  carrying  values  of  long-term  debt  issued by banks  and  capital  lease
obligations  approximate  fair value based on interest rate and repayment terms,
and the extent to which the individual debts are secured.  The fair value of the
Company's 10.5% convertible  debentures  approximates  carrying value based upon
market  interest rates,  its  subordinated  status,  and the market value of the
Company's common stock in relation to the conversion feature of the debt.

(21)  Litigation

The Company is involved in various legal proceedings generally incidental to its
business.  While the results of any  litigation or regulatory  issues contain an
element  of  uncertainty,  management  believes  that the  outcome of any known,
pending or threatened legal proceeding, or all of them combined, will not have a
material  adverse  effect on the  Company's  financial  position  or  results of
operations.

(22)  New Accounting Standards

In June 1998, SFAS No. 133  "Accounting  for Derivative  Instruments and Hedging
Activities"  was  issued.  SFAS No.  133  requires  an entity to  recognize  all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those instruments at fair value. Gains and losses resulting
from changes in the values of those derivatives would be recognized  immediately
or deferred  depending on the use of the  derivative  and if the derivative is a
qualifying hedge. The Company plans to adopt SFAS No. 133 by January 1, 2000, as
required. The Company is currently assessing the impact of this statement on the
Company's consolidated financial statements.

(23)  Supplemental Disclosure of Cash Flow Information

The information  below supplements the cash flow data presented in the Company's
Consolidated Statements of Cash Flows (in thousands):

                                    1999               1998                 1997
                                    ----               ----                 ----
Cash paid (received) for:
 Interest                        $1,702             $1,129               $  863
 Income taxes, net              $  (210)           $   360              $    85

During FY98, the Company  exchanged  $4,311,000 of its convertible  subordinated
debentures  due October  2002 for an equal  amount of  convertible  subordinated
debentures due 2007. In addition to the extended  average maturity of the notes,
the new notes do not contain the restrictive  covenants that were present in the
original issue.  Interest and conversion  terms of the old notes remain the same
in the new notes.

During FY97, the Company incurred capital lease obligations totaling $579,000 in
connection with lease agreements to acquire  equipment.  This non-cash financing
activity has been excluded from the FY97 Consolidated Statement of Cash Flows.

(24)     Related Party Transactions

During FY99 the Company  accepted a $200,000  two-year 7% note  receivable and a
$50,000 demand note from an executive  officer for the purchase of 62,500 shares
of the  Company's  common  stock.  These  amounts  have  been  presented  in the
Stockholders' Equity section of the Consolidated Balance Sheet.


<PAGE>




INDEPENDENT AUDITORS' REPORT



The Stockholders and Board of Directors
Andersen Group, Inc.:

We have audited the accompanying  consolidated balance sheets of Andersen Group,
Inc.  and  subsidiaries  as of  February  28,  1999  and  1998  and the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  years  then  ended.  These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Andersen Group, Inc.
and  subsidiaries  at  February  28,  1999 and 1998,  and the  results  of their
operations  and their cash flows for the years  then  ended in  conformity  with
generally accepted accounting principles.



/s/ Deloitte & Touche LLP


Hartford, Connecticut
April 30, 1999

<PAGE>




INDEPENDENT AUDITORS' REPORT



The Stockholders and Board of Directors
Andersen Group, Inc.:

We have audited the accompanying consolidated statements of operations,  changes
in stockholders' equity, and cash flows of Andersen Group, Inc. and subsidiaries
for the year ended February 28, 1997. These  consolidated  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations and cash flows of
Andersen Group,  Inc. and  subsidiaries  for the year ended February 28, 1997 in
conformity with generally accepted accounting principles.



/s/KPMG LLP

Hartford, Connecticut
April 8, 1997






<PAGE>


ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH
               ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

The  information  required  by this Item is not  applicable  because it has been
previously  reported in the Registrant's  definitive Proxy Statement,  dated May
19, 1999.

                                                               PART III

Certain information required by Part III is omitted from this Report in that the
Registrant has filed a definitive proxy statement pursuant to Regulation 14A not
later than 120 days after the end of the fiscal year  covered by this Report and
certain information included therein is incorporated herein by reference.

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The  information  required  by this Item is  incorporated  by  reference  to the
Registrant's definitive Proxy Statement, dated May 19, 1999, and is incorporated
by reference to the Section in Part I hereof entitled, Executive Officers of the
Registrant.

ITEM 11.    EXECUTIVE COMPENSATION.

The  information  required  by this Item is  incorporated  by  reference  to the
Registrant's definitive Proxy Statement, dated May 19, 1999.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                    AND MANAGEMENT.

The  information  required  by this Item is  incorporated  by  reference  to the
Registrant's definitive Proxy Statement, dated May 19, 1999.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The  information  required  by this Item is  incorporated  by  reference  to the
Registrant's definitive Proxy Statement, dated May 19, 1999.


<PAGE>



                                                                PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                     REPORTS ON FORM 8-K.

(a)1.  Consolidated  Financial  Statements  applicable  to  the  Registrant
contained in Item 8:


                                                                           Pages
Consolidated Balance Sheets
as of February 28, 1999 and 1998                                             20

Consolidated Statements of Operations
or the years ended February 28, 1999, 1998 and 1997                          21

Consolidated Statements of changes in Stockholders' Equity
for the years ended February 28, 1999, 1998 and  1997                        22

Consolidated Statements of Cash Flows
for the years ended February 28, 1999, 1998 and  1997                        23

Notes to Consolidated Financial Statements                                   24

Independent Auditors' Consents                                       E-8 to E-9

(a)2.  Consolidated Financial Statement Schedules:

Schedule
I  Condensed Financial Information                                   F-1 to F-4
II Valuation and Qualifying Accounts                                        F-5

Note:  Schedules  other  than  those  listed  above,  are  omitted  as  not
applicable,  not required,  or the  information is included in the  Consolidated
Financial Statements or notes thereto.

(a)3.    Exhibits required by Item 601 of Regulation S-K:












<PAGE>



Exhibit
  No.                Description

     3.1  Second  Amended  and  Restated  Certificate  of  Incorporation  of the
Registrant.

     3.11 Amended and Restated  By-Laws of the  Registrant as of April 18, 1997,
incorporated  herein by  reference  to Exhibit  3.2 to the  Registrant's  Annual
Report on Form 10-K for the year ended  February 28, 1997  (Commission  File No.
0-1460).

     3.2 Restated By-laws for the State of Delaware.*

     4.1  Indenture,  dated as of February 26, 1998,  between the Registrant and
The Chase  Manhattan  Bank,  as  Trustee,  in respect of  $4,311,000,  aggregate
principal amount, 10 1/2% Convertible Subordinated Debentures Due 2007.

     10.1 Andersen Group, Inc.  Incentive Stock Option Plan incorporated  herein
by reference to Appendix A to the Registrant's Post-Effective Amendment No. 1 to
Form S-8 (File No. 333-17659) filed February 27, 1997.

     10.2 Andersen Group,  Inc.  Incentive and  Non-Qualified  Stock Option Plan
incorporated   herein  by   reference   to   Appendix  B  to  the   Registrant's
Post-Effective  Amendment No. 1 to Form S-8 (File No.  333-17659) filed February
27, 1997.

10.3.   Deferred Compensation Agreement,  entered into as of September 30, 1992,
        by and between the Registrant and Francis E. Baker,  incorporated herein
        by reference to Exhibit 10.26 of the Registrant's  Annual Report on Form
        10-K for the year ended February 28, 1995 (Commission File No. 0-1460).

10.4    Letter Agreement, dated March 7, 1993, between the Registrant and Ronald
        N.  Cerny,  incorporated  herein by  reference  to Exhibit  10.30 to the
        Registrant's  Annual Report on Form 10-K for the year ended February 28,
        1995 (Commission File No.
        0-1460).

10.5 Letter Agreements, dated February 23, 1995 and March 20, 1995, between
the Registrant and Ronald N. Cerny.

     10.6 Asset Purchase Agreement among Phoenix Shannon p.l.c., Andersen Group,
Inc., The J.M. Ney Company and Ney Dental International, Inc. dated as of August
10, 1995,  incorporated  herein by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ending August 31, 1995 (Commission
file No. 0-1460).

     10.7  Amendment  No. 1 to Asset  Purchase  Agreement  by and among  Phoenix
Shannon  p.l.c.,  The J.M.  Ney  Company,  Andersen  Group,  Inc. and Ney Dental
International,  Inc.  made  as of  October  30,  1995,  incorporated  herein  by
reference to Exhibit 10.1 to the  Registrant's  current report on Form 8-K dated
December 13, 1995 (Commission file No. 0-1460).

     10.8  Amendment  No. 2 to Asset  Purchase  Agreement  by and among  Phoenix
Shannon p.l.c.,  The J. M. Ney Company,  Andersen  Group,  Inc., and Ney Metals,
Inc.  (f/k/a  Ney Dental  International,  Inc.)  made as of  October  30,  1995,
incorporated  herein by reference to Exhibit  10.2 to the  Registrant's  current
report on Form 8-K dated December 13, 1995 (Commission file No. 0-1460).

10.9    Revolving  Credit and Deferred  Payment Sales Agreement by and among The
        J. M. Ney Company,  Bank of Boston Connecticut and Rhode Island Hospital
        Trust National Bank made as of the 8th day of October 1996, incorporated
        herein by reference to exhibit 10.13 of the  Registrant's  Annual Report
        on Form 10-K for the year ended February 28, 1997.

10.10  Securities  Purchase  Agreement dated as of December 29, 1997 by and
between The J.M. Ney Company and BankBoston, N.A.

10.11 Asset Purchase Agreement made effective as of February 28, 1998 among
CAE U.S., Inc., Ney Ultrasonics Inc. and Andersen Group, Inc.

10.12   Amendment to Revolving  Credit and Deferred  Payment Sales  Agreement by
        and among The J.M. Ney  Company,  BankBoston  and Rhode Island  Hospital
        Trust National Bank dated December 29, 1997.

10.13 Peter Barker Service Agreement effective January 11, 1999.*

10.14  Settlement  Agreement  with  between  CAE (U.S.) Inc.  ("CAE");  Ney
Technology, Inc. f/k/a Ney Ultrasonics, Inc.; and Andersen Group, Inc.*

21. Subsidiaries of the Registrant.*

23 Consent of Deloitte & Touche LLP.*

27. Financial Data Schedule.*

     (b) Reports on Form 8-K. None.

*Filed herein


<PAGE>




                                                              SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) 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 on May 19, 1999.

ANDERSEN GROUP, INC.                     ANDERSEN GROUP, INC.
Registrant                               Registrant

/s/ Oliver R. Grace, Jr.                 /s/ Peter R. Barker
Oliver R. Grace, Jr.                     Peter R. Barker
Principal Executive Officer              Vice President/Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

NAME                                  TITLE                       DATE

                                      Chairman, Secretary
/s/ Francis E. Baker                  and
Francis E. Baker                      Director                    May 19, 1999

                                      President, Chief
/s/ Oliver R. Grace, Jr.              Executive Officer
Oliver R. Grace, Jr.                  and Director                May 19, 1999

/s/ Peter N. Bennett
Peter N. Bennett                      Director                    May 19, 1999

/s/ John S. Grace
John S. Grace                         Director                    May 19, 1999

/s/ Louis A. Lubrano
Louis A. Lubrano                      Director                    May 19, 1999

/s/ James J. Pinto
James J. Pinto                        Director                    May 19, 1999



<PAGE>




INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors
Andersen Group, Inc.:

We have audited the consolidated  financial  statements of Andersen Group,  Inc.
and  subsidiaries as of February 28, 1999 and 1998 and for the years then ended,
and have issued our report thereon dated April 30, 1999; such report is included
elsewhere in this Form 10-K.  Our audit also  included the  financial  statement
schedules of Andersen  Group,  Inc. and  subsidiaries,  listed in Item 14. These
financial   statement   schedules  are  the   responsibility  of  the  Company's
management.  Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules,  when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly, in
all material respects, the information set forth therein.



/s/ Deloitte and Touche LLP

Hartford, Connecticut
April 30, 1999


<PAGE>
<TABLE>
<CAPTION>


                                                         ANDERSEN GROUP, INC.
                                    Schedule I - Condensed Financial Information of the Registrant
                                                       Condensed Balance Sheets
                                                      February 28, 1999 and 1998
                                                        (amounts in thousands)

<S>                                                                            <C>                               <C>

                                                                                    1999                         1998
-------------------------------------------------------------------------- ----------------------- -----------------------
Assets
Current assets:
Cash and cash equivalents                                                        $ 1,614                     $  1,441
Marketable securities                                                              5,916                        9,001
Receivable from sale of subsidiary                                                     -                        3,521
Accounts and other receivables, less allowance for doubtful
accounts                                                                             230                          125
Prepaid expenses and other assets                                                      5                            5
Deferred income taxes                                                                546                            -
-------------------------------------------------------------------------- ----------------------- -----------------------
Total current assets                                                               8,311                       14,093
Investment in The J. M. Ney Company                                                6,921                        6,604
Subordinated note receivable from The J.M. Ney Company                             4,000                        4,000
Investments                                                                          206                        1,815
Property, plant and equipment, net                                                 2,308                        2,629
Other assets                                                                         940                          896
Deferred income taxes                                                                222                            -
-------------------------------------------------------------------------- ----------------------- -----------------------
                                                                                 $22,908                      $30,037
-------------------------------------------------------------------------- ----------------------- -----------------------
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings                                                            $ 1,392                     $  1,487
Current maturities of long-term debt                                                 316                          441
Accounts payable                                                                     157                          297
Due to The J. M. Ney Company                                                           -                          656
Accrued liabilities                                                                  449                        1,728
Deferred income taxes                                                                  -                          161
-------------------------------------------------------------------------- ----------------------- -----------------------
Total current liabilities                                                          2,314                        4,770
Long-term debt, less current maturities                                            3,522                        4,124
Other long-term liabilities                                                          643                          596
Deferred income taxes                                                                                             351
                                                                           -
-------------------------------------------------------------------------- ----------------------- -----------------------
Total liabilities                                                                  6,479                        9,841
-------------------------------------------------------------------------- ----------------------- -----------------------
Commitments and contingencies (Note 7)
Stockholders' equity:
Cumulative convertible preferred stock,
    no par value; authorized 800,000 shares; issued
    789,628 shares; outstanding 256,416 shares;
    liquidation preference $18.75 per share                                        4,769                        4,769
Common stock, no par value; authorized 6,000,000
shares,                     issued 1,958,478 shares                                   20                        2,103
Additional paid-in capital                                                         5,339                        3,248
Treasury stock, at cost, 30,549 shares in 1999; 21,800 shares in 1998               (142)                         (82)
Receivable from officer                                                             (250)                           -
Retained earnings                                                                  6,693                       10,158
-------------------------------------------------------------------------- ----------------------- -----------------------
Total stockholders' equity                                                        16,429                       20,196
-------------------------------------------------------------------------- ----------------------- -----------------------
                                                                                 $22,908                      $30,037
-------------------------------------------------------------------------- ----------------------- -----------------------
See accompanying notes to condensed financial information.



                                                                  F-1
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                       ANDERSEN GROUP, INC.
                                    Schedule I - Condensed Financial Information of the Registrant
                                                  Condensed Statements of Operations
                                                Years ended February 28, 1999 and 1998
                                             (amounts in thousands, except per share data)

<S>                                                              <C>                               <C>


                                                                            1999                         1998
------------------------------------------------------- ----------------------------------- ------------------------------------
Revenues:
Investment (loss) income and other income                          $(2,376)                          $  3,691
------------------------------------------------------- ----------------------------------- ------------------------------------

Costs and expenses:
General and administrative                                           2,080                              2,223
Interest expense                                                       503                                694
------------------------------------------------------- ----------------------------------- ------------------------------------
                                                                     2,583                              2,917
------------------------------------------------------- ----------------------------------- ------------------------------------
(Loss) income from continuing operations
     before income taxes and equity in earnings
     of The J.M. Ney Company                                        (4,959)                               774
Income tax (benefit) expense                                        (1,678)                               361
------------------------------------------------------- ----------------------------------- ------------------------------------
(Loss) income  from continuing operations
    before equity in earnings of
    The J.M. Ney Company                                            (3,281)                               413
Equity in earnings of The J.M. Ney Company                             317                              1,357
------------------------------------------------------- ----------------------------------- ------------------------------------
(Loss) income from continuing operations                            (2,964)                             1,770
Income from discontinued operations,
    net of income taxes                                                  -                                345
(Loss) gain on sale of discontinued segment,
    net of income taxes                                               (116)                                97
------------------------------------------------------- ----------------------------------- ------------------------------------
Net (loss) income                                                   (3,080)                             2,212
Preferred dividends                                                   (385)                              (477)
Reversal of preferred dividend                                           -                                 37
------------------------------------------------------- ----------------------------------- ------------------------------------
(Loss) income applicable to common shares                          $(3,465)                          $  1,772
------------------------------------------------------- ----------------------------------- ------------------------------------

(Loss) earnings per common share:
BASIC
    Continuing operations                                          $ (1.74)                        $    0.69
    Discontinued operations                                              -                              0.18
    (Loss) gain on sale of discontinued segment                       (.06)                             0.05
------------------------------------------------------- ----------------------------------- ------------------------------------
    (Loss) income per common share, basic                          $ (1.80)                        $    0.92
------------------------------------------------------- ----------------------------------- ------------------------------------

DILUTED
    Continuing operations                                          $ (1.74)                        $    0.68
    Discontinued operations                                               -                             0.18
    (Loss) gain on sale of discontinued segment                       (.06)                             0.05
------------------------------------------------------- ----------------------------------- ------------------------------------
    (Loss) income per common share, diluted                        $ (1.80)                        $    0.91
------------------------------------------------------- ----------------------------------- ------------------------------------
See accompanying notes to condensed financial information.



                                                                  F-2
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                              ANDERSEN GROUP, INC.
                                         Schedule I - Condensed Financial Information of the Registrant
                                                       Condensed Statements of Cash Flows
                                                     Years ended February 28, 1999 and 1998
                                                             (amounts in thousands)

<S>                                                                  <C>                               <C>

                                                                       1999                             1998
----------------------------------------------------------- ------------------------------- --------------------------------
Cash flows from operating activities:
Net (loss) income                                                      $(3,080)                        $ 2,212
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Equity in earnings of The J. M. Ney Company                               (317)                         (1,357)
Equity in earnings of Ney Ultrasonics                                        -                            (345)
Depreciation, amortization and accretion                                   157                             216
Deferred income taxes                                                   (1,280)                            880
(Loss) gain on sale of Ney Ultrasonics                                     116                             (97)
Net losses (gains)  from securities                                      4,247                          (2,619)
Purchases of securities                                                 (1,336)                         (2,218)
Proceeds from sales of securities                                        1,783                           1,230
Gain on sale of property                                                   (25)                              -
Changes in operating assets and liabilities:
Accounts and notes receivable                                             (105)                            (72)
Prepaid expenses and other assets                                            1                             372
Accounts payable, accrued liabilities and other
  long-term obligations                                                 (1,464)                           (409)
----------------------------------------------------------- ------------------------------- --------------------------------
Net cash used in operating activities                                   (1,303)                         (2,207)
----------------------------------------------------------- ------------------------------- --------------------------------
Cash flows from investing activities:
Proceeds from sale of Ultrasonics segment                                2,800
Purchase of property, plant and equipment                                  (22)                            (34)
Proceeds from sale of property                                             223                               -
Proceeds from collection of investments                                      -                           1,542
Investment in other assets                                                   -                          (1,225)
----------------------------------------------------------- ------------------------------- --------------------------------
Net cash provided by investing activities                                3,001                             283
----------------------------------------------------------- ------------------------------- --------------------------------
Cash flows from financing activities:
Principal payments on long-term debt                                      (727)                         (2,561)
Proceeds from short-term debt                                              (95)                          1,486
Redemption of preferred stock                                                -                            (160)
Stock options exercised                                                     50                               -
Treasury shares purchased, net                                            (352)                              -
Dividends paid                                                            (401)                         (1,222)
Dividends received from The J. M. Ney Company                                -                           3,518
----------------------------------------------------------- ------------------------------- --------------------------------
 Net cash (used in) provided by financing activities                    (1,525)                          1,061
----------------------------------------------------------- ------------------------------- --------------------------------
 Net increase (decrease) in cash and cash equivalents                      173                            (863)
 Cash and cash equivalents, beginning of year                            1,441                           2,304
----------------------------------------------------------- ------------------------------- --------------------------------
 Cash and cash equivalents, end of year                                $ 1,614                        $  1,441
----------------------------------------------------------- ------------------------------- --------------------------------
Supplemental disclosure of cash flow information
Cash paid (received) for:
 Interest                                                             $    538                       $     766
 Income taxes, net                                                    $   (210)                      $     360
----------------------------------------------------------- ------------------------------- --------------------------------
                     See accompanying notes to condensed financial information.



                                                                      F-3
</TABLE>


<PAGE>


                                                       ANDERSEN GROUP, INC
                                    Schedule I - Condensed Financial Information
                                                     of the Registrant

                                       Notes to Condensed Financial Information
                                                February 28, 1999 and 1998
NOTE 1 - GENERAL

The Condensed  Financial  Information  presented  herein is required because the
Registrant's  wholly owned subsidiary,  The J. M. Ney Company (JM Ney),  entered
into a Revolving  Credit and Deferred  Payment Sales Agreement with a commercial
bank in October 1996 which was  subsequently  amended  December  30, 1997.  This
agreement contains covenants that limit the transfer of cash and other resources
from JM Ney to the Registrant.

The  Condensed  Financial  Information  of the  Registrant  should  be  read  in
conjunction  with  the  Consolidated  Financial  Statements  and  the  Notes  to
Consolidated  Financial  Statements  which are  included  in Item 8 herein.  The
Condensed  Financial  Information  of the  Registrant  includes  the accounts of
several  wholly owned  subsidiaries  which are  immaterial  to the  Registrant's
Condensed Financial Information.

NOTE 2 - TRANSACTIONS WITH AFFILIATES

The Registrant and its wholly owned  subsidiaries  share certain  administrative
services. The costs of these services are allocated to the entity which receives
the  service.  The  following  are among the types of  services  which have been
provided to the Registrant by JM Ney: maintenance,  accounting, human resources,
management  information  systems  and the  rental  of  office  space in JM Ney's
facility.  Services  provided by the Registrant to JM Ney include the following:
legal,  tax,  and business  advisory  services.  During  FY98,  JM Ney made a $4
million  distribution to the Registrant in the form of an 8% junior subordinated
note due January 31, 2005.  Effective  December  1997, the Registrant and JM Ney
also entered  into a Financial,  Investment  Banking and  Professional  Services
Agreement under which, subject to JM Ney's compliance with certain covenants, JM
Ney will pay the  Registrant  fees for defined  services.  The  retainer for the
first  15  months  of  this  agreement  was  at the  annual  rate  of  $500,000.
Thereafter,  the retainer will increase by $100,000 per year. The agreement runs
through  November 30, 2002.  During FY99 and FY98, JM Ney paid or accrued to the
Registrant  a total of  $820,000  and  $205,000,  respectively  under  these two
agreements.

In  connection  with JM Ney  entering  into the  Revolving  Credit and  Deferred
Payment Sales  Agreement  referred to above,  the  Registrant and JM Ney entered
into a Tax Sharing  Agreement,  effective as of March 1, 1996, which requires JM
Ney to pay the Registrant an amount which may be equal to the maximum  allowable
amount  of any  Federal  and State  income  taxes for which JM Ney or any of its
subsidiaries would have been liable for in the particular year. During FY98, the
Registrant and JM Ney refined their accounting for deferred income taxes,  which
resulted  in a transfer  of  $1,041,000  of deferred  tax  obligations  from the
Registrant to JM Ney. The  Registrant  files a  consolidated  Federal income tax
return with its subsidiaries.

                                                                  F-4


<PAGE>



NOTE 3 - SHORT TERM BORROWINGS

At February 28, 1998,  the Registrant  had a $1,392,000  demand loan,  which was
secured by a portion of the  Company's  portfolio of marketable  securities.  At
February 28, 1999 interest on this borrowing was charged at 5.8%.

NOTE 4 - LONG TERM DEBT
<TABLE>
<CAPTION>

Long-term debt consists of the following (in thousands):
<S>                                                                      <C>                            <C>


                                                                       February 28, 1999                 February 28, 1998
                                                                       -----------------                 -----------------
Convertible  subordinated  debentures,  due  October  2007;  interest  at 10.5%,
 payable semi-annually; annual principal payments in varying amounts through
 maturity, unsecured                                                               $3,759                      $4,311
Other                                                                                  79                         254
                                                                                 --------    -               --------
                                                                                    3,838                       4,565
Less current maturities                                                               316                         441
                                                                                  ------- -                  --------
                                                                                   $3,522                      $4,124
                                                                                   ======                      ======

</TABLE>

The terms of the 2007  convertible  subordinated  debentures call for the annual
redemption of approximately $431,000 of principal The debentures are convertible
into  common  stock  of the  Company  at any  time  prior  to  maturity,  unless
previously  redeemed,  at $16.17 per share,  subject to adjustment under certain
conditions.  At February 28, 1999,  232,468 shares of common stock were reserved
for conversion.

Maturities  of  long-term  debt for each of the next  five  fiscal  years are as
follows (in thousands):


                 2000                                        $  316
                 2001                                           439
                 2002                                           439
                 2003                                           439
                 2004                                           440
                 Thereafter                                   1,765
                                                            -------
                                                             $3,838

NOTE 5 - CUMULATIVE CONVERTIBLE PREFERRED STOCK

See Note 12 to the Registrant's  Consolidated  Financial Statements contained in
Item 8 herein.


NOTE 6 - CASH DIVIDENDS

The amount of cash  dividends  paid to the Registrant by JM Ney during FY98
was  approximately  $3,518,000.  No such dividends were paid or declared  during
FY99.



<PAGE>


NOTE 7 - LITIGATION

The Registrant is involved in various legal proceedings  generally incidental to
its business.  While the results of any litigation or regulatory  issues contain
an element of  uncertainty,  management  believes that the outcome of any known,
pending or threatened legal proceeding, or all of them combined, will not have a
material  adverse  effect on the  Company's  financial  position  or  results of
operations.


<PAGE>



                                                   ANDERSEN GROUP, INC.
                                 Schedule II - Valuation and Qualifying Accounts
                                                 (Amounts in thousands)


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

                                                      Additions
                        Balance at        Charged to         Charged to
                         beginning        costs and            to other                              Balance at
Description                Of year         expenses            accounts          Deductions          end of year

February 28, 1999
----------------------- ----------------- ------------------ ------------------- ------------------- ------------------
Allowance for
doubtful accounts            $ 130              (22)                                     2(a)               $110
Reserve for returns
                             $  95              (15)                                                        $ 80
February 28, 1998
----------------------- ----------------- ------------------ ------------------- ------------------- ------------------
Allowance for
doubtful accounts            $ 190               17                 (36)(b)            (41)(a)              $130
Reserve for returns          $  95                                                                          $ 95
Warranty reserve             $  70              (30)                (40)(b)                                 $  0

February 28, 1997
----------------------- ----------------- ------------------ ------------------- ------------------- ------------------
Allowance for
doubtful accounts             $124               76                                    (10)(a)              $190
Reserve for returns
                              $  0               95                                                         $ 95

Warranty reserve              $100              (30)                                                        $ 70



     (a) Write offs net of recoveries.

     (b)  Transferred  in connection  with sale of certain assets of Ultrasonics
segment.



</TABLE>







<PAGE>



                                                             EXHIBIT INDEX


Exhibit
  No.               Description                                          Page

     3.1 Second Amended and Restated Certificate of Incorporation. E-2

     4.1  Indenture,  dated as of February 26, 1998,  between the Registrant and
The Chase  Manhattan  Bank,  as  trustee,  in respect of  $4,311,000,  aggregate
principal amount, 10 1/2% Convertible Subordinated Debentures Due 2007.* E-3

     10.9 Securities  Purchases  Agreement dated as of December 29, 1997. E-3 by
and between The J.M. Ney Company and  BankBoston,  N.A. E-4

     10.10 Asset Purchase Agreement made effective as of February 28, 1998 among
CAE U.S., Inc., Ney Ultrasonics Inc. and Andersen Group, Inc. E-5

     10.11 Amendment to Revolving Credit and Deferred Payment Sales Agreement by
and among The J.M.  Ney Company,  BankBoston  and Rhode  Island  Hospital  Trust
National Bank dated December 29, 1997. E-6

     21.  Subsidiaries of the  Registrant.  E-7

     23. Consent of Deloitte & Touche LLP. E-8

     27. Financial Data Schedule. E-9


















                                                                  E-1


<PAGE>




                                      SUBSIDIARIES OF THE REGISTRANT

                                                               State or
                                                              Country of
           Name or Organization                               Incorporation


           AG Investors, Inc.                               Florida

           AGI Technology, Inc.                             Connecticut

           Andersen Realty, Inc.                            Delaware

           Ney International, Inc.                          U.S. Virgin Islands

           Ney Technology, Inc.
           (f/k/a Ney Ultrasonics Inc.)                     Delaware

           The J.M. Ney Company                             Delaware

           New Jersey Precious Metals, Inc.                 Delaware

           Garden State Refining, Inc.                      Delaware
























                                                                   E-7


<PAGE>



                                                                      Exhibit 23

INDEPENDENT AUDITORS' CONSENT



     We consent to the  incorporation  by reference in Post Effective  Amendment
No. 1 to  Registration  Statement  No.  333-17659  of Andersen  Group,  Inc. and
subsidiaries  on Form S-8 of our reports  dated April 30, 1999,  relating to the
consolidated  financial statement and financial statement schedules appearing in
this Annual Report on Form 10-K of Andersen Group, Inc. and subsidiaries for the
year ended February 28, 1999.



/s/Deloitte & Touche LLP
Hartford, Connecticut
May 21, 1999

E-8