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, 1998             or

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

      For the transition period from __________ to __________

                          Commission File Number: 0-1460

                              ANDERSEN GROUP, INC.
             (Exact name of Registrant as specified in its charter)

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

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

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

        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, No 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.

     The  aggregate  market  value of the Common  Stock,  no par value,  held by
non-affiliates  of the Registrant based upon the average bid and asked prices on
May 8,  1998,  as  reported  on  the  NASDAQ  Stock  Market,  was  approximately
$8,646,000. 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 8, 1998, there were 1,930,478 shares of Common Stock, no par
value, outstanding.
                      DOCUMENTS INCORPORATED BY REFERENCE:
                        Portions of the definitive Proxy
                          Statement dated May 19, 1998,
             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.

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,   however,   the  Registrant's   primary   investment,   comprising
approximately  33% of the Company's total 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 Ultrasonics  Cleaning
Equipment segment were sold.

     In  December  1997,  JM  Ney  borrowed  $7.5  million  on a  10.26%  bullet
subordinated  note,  due 2004 with  warrants,  entitling  the lender to purchase
40,000 shares of JM Ney capital  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 capital stock as part of the consideration  paid.
While criteria for a strategic  acquisition have been identified,  no agreements
have been reached concerning any possible targets. In addition to the investment
in JM Ney,  since April 1993,  the  Registrant has held an investment in Digital
GraphiX,  Incorporated  (DGI), a video graphics company.  DGI sold substantially
all of its assets in April 1997 and has  substantially  completed the winding up
of its affairs (see "Other Investments").

     Effective  June  1,  1997,  as part of a  strategic  reorganization  of the
Company,  Oliver R. Grace, Jr., the Company's former Chairman,  became President
and Chief Executive Officer,  and Francis E. Baker, the Company's  President and
Chief Executive  Officer from 1959 to 1997,  became  Chairman and Secretary.  In
addition,  in May 1998 the Company's  principal executive offices were relocated
to New York, New York.

Industry  Segment  Information.

     Financial   information   regarding  the  Company's  industry  segments  is
contained in Note 18 to the Registrant's  Consolidated  Financial Statements for
the fiscal year ended February 28, 1998 contained in Item 8 herein.

Narrative  Description  of Business.

     During  the  fiscal  year  ended   February  28,  1998,  the  Company  held
investments in companies that operated in two business segments, Electronics and
Ultrasonic Cleaning Equipment. As noted below, 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.  In
addition,  the Company  held  interests  in a company with plans to develop data
transmission  networks throughout the Commonwealth of Independent States, and in
a Russian  titanium  producing  company.  The Company  also holds a portfolio of
marketable  securities  comprised  primarily  of the  common  stock  of  certain
financial  institutions  and of companies based in, or mutual funds which invest
in, companies based in Russia or other Eastern European countries.

Electronics Segment

The  Electronics  segment,  which  consists  of  the operations of  JM Ney, 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),
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.

     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 the 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.

JM Ney sells to more than 800  customers,  with  approximately  85% 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) each accounted for more than 10% of the Registrant's  consolidated sales
in fiscal 1998.

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 for approximately $3.5 million in cash. In
addition to  consideration  received at closing,  and anticipated to be received
upon the agreement of closing date financial information, the Company expects to
receive  consideration during the next several years based on growth of sales of
certain products by the purchasers of Ney Ultrasonics net assets.  See Note 5 to
the Company's  Consolidated Financial Statements for the year ended February 28,
1998 contained in Item 8 herein.

Other Investments

Trading Portfolio

At February 28, 1998, the Company had a portfolio of short-term investments with
a reported  value of  $9,001,000.  The  reported  amount is  reflected  net of a
$617,000  valuation  reserve to provide for  volatility  and liquidity  concerns
relating  to  marketable  investments  in  Russia  and  other  eastern  European
countries.  The larger components of these  investments  include $5.6 million of
common  stocks of savings  banks and $2.4  million of the CA IB Emerging  Russia
Fund. In addition,  these investments include investment in Ukrainian and Polish
companies,  common stock of Centennial  Cellular,  Inc. and municipal bonds. See
Note 3 to the Company's  Consolidated  Financial  Statements  for the year ended
February 28, 1998 contained in Item 8 herein.

Digital GraphiX

During fiscal 1998 the Company  received  payments of its  investments in notes,
preferred  stock and common  stock of DGI,  pursuant to DGI's  liquidation  as a
result of the sale of  substantially  all of its net assets in April  1997.  For
further  information  on the  Registrant's  investment in DGI, see Note 7 to the
Company's  Consolidated  Financial Statements for the fiscal year ended February
28,  1998  contained  in Item 8 herein,  and Certain  Relationships  and Related
Transactions in Item 13.

Institute for Automated Systems

The  Company  also  holds an  investment  in Treglos  Investments,  LTD, a joint
venture that is investing in the  Institute  for  Automated  Systems,  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 the Institute for Automated  Systems.  Among the joint
venture partners are the Company's Chairman and another Director.  See Note 7 to
the  Company's  Consolidated  Financial  Statements  for the  fiscal  year ended
February 28, 1998  contained  in Item 8 herein,  and Certain  Relationships  and
Related Transactions in Item 13.



<PAGE>


AVISMA

The Company also owns 9,734 shares of AVISMA, a Russian based titanium producer.
These  shares  were  purchased  during  fiscal  1998  for an  aggregate  cost of
approximately $1,225,000. They are being valued for financial reporting purposes
net of a valuation  reserve of  $245,000.  AVISMA  will be merged into VSMPO,  a
Russian titanium processing  company,  under the terms of a transaction in which
VSMPO will be the surviving entity.  There is currently a limited trading market
for AVISMA. The Company anticipates improved liquidity following the merger with
VSMPO.  See Note 7 to the Company's  Consolidated  Financial  Statements for the
fiscal year ended  February  28, 1998  contained  in Item 8 herein,  and Certain
Relationships and Related Transactions in Item 13.

Research and Development

During fiscal years 1998, 1997, and 1996, research and development  expenditures
from continuing  operations  totaled  approximately  $1,444,000,  $1,228,000 and
$1,374,000, 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  lack of palladium  shipments from
Russia to the world market,  the Company believes that its sources of supply are
adequate for its continuing needs.

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, 1998, the Company, including all subsidiaries, had 191 full-time
employees and one part-time employee. None of these employees are 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.

Forward Looking Statements

This report contains forward-looking  statements,  which are subject to a number
of risks, and  uncertainties  that may cause actual results to differ materially
from expectations.


<PAGE>


Executive Officers of the Company

The Executive Officers of the Company and certain  significant  employees of its
subsidiaries are as follows:
<TABLE>
<CAPTION>
------------------------------- -------- ----------------------------------------------------------- -----------------
                                                                                                         Officer
             Name                 Age                             Position                                Since
------------------------------- -------- ----------------------------------------------------------- -----------------
<S>                               <C>    <C>                                                               <C> 
Francis E. Baker                  68     Chairman and Secretary                                            1959
Oliver R. Grace, Jr.              44     President and Chief Executive Officer                             1997
Bernard F. Travers, III           40     Assistant Secretary                                               1993
Ronald N. Cerny                   46     President, The J.M. Ney Company                                   1993
Andrew M. O'Shea                  39     Treasurer of the Company; Chief Financial Officer and
                                         Secretary, The J.M. Ney Company                                   1995
Eugene Phaneuf                    51     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., the Company's  Chairman,  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
June 1, 1997. Mr. Baker is also the Secretary of the Company,  a position he has
held since May 1997.

     Mr.  Travers,  III joined the Company in 1983. He was promoted to Assistant
Secretary in June 1993.  From 1990 through the present he has also served as the
Company's  Director  of Law and  Taxation.  Mr.  Travers  is an  attorney  and a
Certified Public Accountant.

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  became  Treasurer  of the Company in June 1997.  He 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 were relocated to New York, New York
in 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  owners of its  former  Dental  and  Ultrasonic  Cleaning
Equipment segments, 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 previously  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 previously  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.

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

On January 14, 1998, Anthony Nicholas Georgiou,  et al. v. Mobil Exploration and
Producing Services, Inc., Metromedia International Telecommunications,  Inc., et
al., was filed in the United States District Court for the Southern  District of
Texas. Plaintiffs claim that the defendants, including the Registrant and Oliver
R. Grace, Jr. the Registrant's President and Chief Executive Officer, interfered
with plaintiffs' business relationships with several companies involving certain
oil  exploration  and  production  contracts  in Siberia and  telecommunications
contracts in the Russian  Federation.  The specific counts are civil conspiracy,
tortious  interference with contractual  relationships and tortious interference
with  prospective  contractual  relationships.  Plaintiffs  have alleged  actual
damages in excess of  $500,000,000  and have  sought  punitive  damages of three
times alleged actual  damages.  The Company filed its answer denying each of the
substantive  allegations of wrongdoing contained in the complaint.  In addition,
the  Company  has moved to  dismiss  this case in Texas  against  it for lack of
personal jurisdiction.

The Company  believes that this action  against it will be dismissed for lack of
personal  jurisdiction.  If the action were not dismissed,  the Company believes
that it has  meritorious  defenses and will  continue to  vigorously  defend the
action. The Company is investigating whether any liability,  which may accrue at
some  future  date,  may be  subject to  reimbursement  in whole or in part from
insurance  proceeds.  As of this date,  the Company has no basis to conclude the
litigation may be material to the Company's financial condition or business.



<PAGE>


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

On February 25, 1998, the Company held a special meeting of its  stockholders to
amend  and  restate  the   Company's   Amended  and  Restated   Certificate   of
Incorporation to eliminate  certain  restrictions on the payment of dividends on
the  Company's  Common Stock and the Company's  Series A Cumulative  Convertible
Preferred  Stock,  change the dividend  payment rate on the Preferred  Stock and
eliminate the requirement that the Company redeem the Preferred Stock.

The number of votes  cast for,  against  or  withheld,  as well as the number of
abstentions and broker non-votes of each class of capital stock entitled to vote
is set forth below:
<TABLE>
<CAPTION>

Class of Stock                  For             Against                 Withheld                   Abstentions
<S>                          <C>                 <C>                     <C>                         <C>   
Common                       1,140,084           37,782                  744,234                     13,378
Preferred                      236,258            5,832                    5,614                      8,744
</TABLE>

     Based upon these results, the changes to the Company's Amended and Restated
Certificate  of  Incorporation  was amended to reflect  the changes  referred to
above.

                                     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 8, 1998 was 625 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, 1998                   High                   Low                    Close
--------------------------------------------- ---------------------- ------------------------ ----------------------
    <S>                                              <C>                      <C>                    <C> 
    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 7/8
--------------------------------------------- ---------------------- ------------------------ ----------------------
</TABLE>
<TABLE>
<CAPTION>

--------------------------------------------- ---------------------- ------------------------ ----------------------
        Year ended February 28, 1997                   High                   Low                    Close
--------------------------------------------- ---------------------- ------------------------ ----------------------
    <S>                                               <C>                     <C>                    <C>
    First Quarter                                     6 1/2                   3 3/4                  6
    Second Quarter                                    7                       5 1/4                  6 1/2
    Third Quarter                                     7                       3 1/4                  5 1/4
    Fourth Quarter                                    6 1/2                   5                      5 1/2
--------------------------------------------- ---------------------- ------------------------ ----------------------
</TABLE>


<PAGE>


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 for the fiscal year ended  February 28, 1998 contained
in Item 8 herein, (amounts in thousands, except per share data).
<TABLE>
<CAPTION>

------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Years ended February                      1998              1997             1996            1995            1994
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
<S>                                      <C>               <C>             <C>             <C>              <C>    

Revenues (1)                             $28,868           $20,501         $19,437         $24,520          $17,024
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Income (loss) from continuing
operations                                 1,770               334          (1,921)           (397)            (923)
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Net income (loss)                          2,212               299           1,933            (388)            (868)
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Income (loss) applicable to
common shares                              1,772                22           2,389            (975)          (1,468)
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Income (loss) from continuing
operations per common share,
diluted                                      .68               .03            (.76)           (.90)           (1.22)
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Income (loss) per common
share, diluted                               .91               .01            1.23            (.50)           (0.80)
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Depreciation, amortization
and accretion                              1,480             1,419           1,887           2,329            3,368
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Total assets                              44,771            37,677          38,798          43,679           48,590
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Total debt                                14,537            10,119           8,485          12,328           16,371
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Redeemable preferred stock                  -                4,891           5,280          10,593           10,494
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Common and other stockholders' 
equity (2)                                20,196            13,647          13,625           9,913           10,837
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
Book value per common share                 7.97              7.05            7.04            5.13             5.62
------------------------------------ ---------------- ----------------- --------------- --------------- ----------------
</TABLE>

(1) The results of Digital  GraphiX are included in 1994, 1995 and two months of
1996.  Net sales and  revenues,  and income (loss) 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) 1998  amount  includes  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

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  represents
the  combination of 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  reflects  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,  versus a loss of
$142,000 in FY97, as follows (000s omitted):
<TABLE>
<CAPTION>


                                                                           FY98          FY97
<S>                                                                       <C>           <C>   
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 each of the two most recent years
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 totaled $17,040,000, or 67.1% of net sales in FY98, versus cost of
sales of  $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  easily
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.

During the first quarter of FY99, the price of palladium has increased  further.
JM Ney has utilized expanded metals hedging,  financing and purchasing  programs
to reduce the adverse  exposure that this development may have on its results of
operations.

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, versus 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 an increased  amount of 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.  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
current year 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.

DISCONTINUED OPERATIONS
-----------------------
Effective  February 28, 1998, the Company sold the net assets of Ney Ultrasonics
for approximately $3.5 million and additional contingent  consideration.  Net of
expenses incurred in the transaction,  the Company recognized a gain of $97,000,
net of tax. For the year then ended,  Ney  Ultrasonics  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.  The Company is optimistic that continuation of
the market  penetration of the  ultrasonic  cleaning  technology  will result in
increased future profits in the form of contingent consideration from the sale.

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,  including
earnings  relating to Ney Ultrasonics  and the former Dental segment,  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,  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.

1997 VS. 1996

REVENUES
--------
For the year ended February 28, 1997 (FY97), revenues from continuing operations
totaled  $20,501,000,  which were 5.5% more than revenues during the fiscal year
ended  February  29,  1996  (FY96).  This  increase  primarily  reflects a 24.8%
increase  in sales for The J.M.  Ney  Company (JM Ney),  losses  sustained  from
investments  in  Phoenix  Shannon,  p.l.c.,  and the  absence  of sales from the
Company's former Video Products segment.

Sales  from  JM  Ney  were  $20,643,000   during  FY97,  versus  FY96  sales  of
$16,544,000.  Sales  growth  was  generated  in  automotive,  medical  and other
industrial markets, which resulted from expansion of manufacturing  capabilities
and effective  marketing  efforts.  Additional  sales growth was generated  from
dental alloy fabrication services to the Company's former Dental segment,  which
during FY96 was included  for only three months after the sale of that  division
to  Phoenix  Shannon.  Sales  from  Digital  GraphiX,  Incorporated  (DGI),  the
Company's  formerly  consolidated  Video Products  segment,  totaled  $2,080,000
during the first two months of FY96.  Due to an offering of DGI's common  stock,
the Company's  ownership was diluted and DGI's results beyond that date were not
consolidated with those of the Company.  Accordingly,  during FY97, this segment
did not generate any reported sales for the Company.

Investment and other income produced a net loss of $142,000 during FY97,  versus
income of $813,000 in the prior fiscal year. A significant decline in the market
value of Phoenix  Shannon  common stock  resulted in the  complete  write-off of
$2,175,000  of the  Company's  investment  in Phoenix  Shannon,  including  a $1
million note  receivable.  During  FY96,  the Company  absorbed a $525,000  loss
relating to a decline in the market value of Phoenix Shannon's common stock.

Gains from common  stocks,  which  primarily  comprised  investments  in certain
financial institutions, produced net investment gains of $1,032,000 during FY97,
while these investment  activities yielded $585,000 of net gains during FY96. In
addition, rental income increased from $281,000 in FY96 to $342,000 in FY97, due
primarily to a full year of revenue from the former  Dental  segment,  which has
leased  space in the  Company's  100,000  square foot  office and  manufacturing
facility.  Interest income of $342,000 in FY97 was 27.1% lower than the $469,000
recorded in FY96,  due  primarily to reduced  interest  related to the Company's
note  receivable from DGI, which was partially  offset by increased  interest on
excess cash balances.  The DGI note was partially  converted to DGI's  preferred
stock  during  FY97,  and no  accruals  of dividend  income  were  recorded.  In
addition,  fee income of $200,000 in FY97 added to the total of  investment  and
other income.

COST OF SALES
-------------
Cost of sales of  $13,259,000  in FY97  represented  64.2% of sales,  while such
costs  amounted to  $12,016,000,  or 64.5% of sales during FY96.  The  increased
gross  margins,  35.8% versus  35.5%,  represents  the net of a 1.5% increase in
margins  for JM Ney,  and the  absence  of higher  margin  sales  from the Video
Products segment, for which only modest sales were reported for FY96.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
Selling,  general and  administrative  expenses of  $5,772,000  during FY97 were
24.9% lower than the $7,683,000 of such expenses reported for FY96. A write-down
in FY96 of $1 million of the  Company's  investment  in DGI,  and  approximately
$950,000 of legal and settlement costs relating to a suit filed against a former
subsidiary  of the  Company  accounted  for  most of the  higher  costs in FY96.
Selling,  general and administrative  expenses totaled 28.2% of revenues in FY97
versus 39.5% in FY96.

RESEARCH AND DEVELOPMENT EXPENSES
---------------------------------
Research  and  development   expenses  decreased  from  $1,374,000  in  FY96  to
$1,228,000  in FY97 due to the absence in FY97 of such  expenses  from DGI. Such
expenses,  excluding DGI, were $1,041,000, or 6.3% of sales in FY96, versus 5.9%
of sales for FY97. The relative  increase  reflects efforts at JM Ney to develop
new precious metal alloys, and product processes.

INTEREST EXPENSE
----------------
Interest  expense of  $790,000  during FY97  represents  a 36.1%  decrease  from
interest expense of $1,237,000 incurred during FY96.  Principal payments in both
years on  long-term  obligations,  including  prepayments  made  during  FY97 to
implement a Capital Stock Purchase Program, along with lower average outstanding
amounts  under  revolving  credit  agreements,  resulted  in the lower  interest
expense in FY97.

INCOME TAX BENEFIT
------------------
An income tax benefit of $882,000 relating to continuing operations was recorded
in FY97 due to the $548,000  pre-tax loss and to the  favorable  settlement of a
state income tax audit relating to prior years which was the primary factor that
enabled the Company to reverse approximately $546,000 of accrued income taxes. A
tax  benefit of  $952,000  relating  to  $2,873,000  of losses  from  continuing
operations was recorded in FY96.

DISCONTINUED OPERATIONS
-----------------------
During FY97, Ney Ultrasonics'  operations produced a net loss of $35,000, versus
a net loss of $349,000 from this former  segment in FY96.  Market  acceptance of
newly-introduced ultrasonic cleaning technology improved its sales and operating
results. In addition,  during FY96, nine months of activities from the Company's
former Dental segment produced net income of $413,000, or $0.21 per share. A net
gain of  $3,790,000,  or $1.96 per share,  was recorded in FY96 from the sale of
the net assets of this segment to Phoenix Shannon.  This gain included  $519,000
of a curtailment gain relating to JM Ney's defined benefit pension plan. Part of
the  proceeds  received  from the sale of the Dental  segment  included  200,000
shares of Phoenix  Shannon's  stock,  which were valued at  $1,700,000  and a $1
million note  receivable.  As noted,  during FY96 and FY97,  the entire value of
this portion of the  consideration  was completely  written off. Phoenix Shannon
was  subsequently  placed into  bankruptcy and its assets,  including the former
Dental segment,  were sold.  However,  such proceeds were insufficient to enable
the Company to realize any value from either the note or the stock.

PREFERRED DIVIDENDS
-------------------
The preferred dividend  requirement,  including the amortization of the issuance
discount,  totaled  $411,000  in FY97  versus  $559,000  in FY96.  The  decrease
reflects the combination of fewer  outstanding  preferred  shares in FY97 versus
FY96 due to share  purchases in the fourth  quarters of both FY96 and FY97,  and
increased per-share dividends. Due to increased consolidated operating income of
The J.M. Ney Company, including the results of Ney Ultrasonics,  and the gain on
the sale of the Dental segment, per-share dividends increased from $0.78 in FY96
to $1.24 in FY97.

NET INCOME
----------
For  FY97,  the  Company  reported  net  income  of  $299,000.  After  preferred
dividends,  and reversal of preferred dividends due to the repurchase of shares,
income  applicable to common  shareholders was $22,000 or $0.01 per share.  This
compares to net income of  $1,933,000,  including the gain on sale of the Dental
segment  and  the  results  of both  discontinued  operations.  After  preferred
dividends and the reversal of $1,015,000 of dividends from share purchases, FY96
income applicable to common shareholders was $2,389,000, or $1.23 per share.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

At  February  28,  1998,   consolidated  cash  and  short-term  investments  and
marketable securities totaled approximately  $11,517,000,  which was an increase
of $2,953,000  from the February 28, 1997 total of  $8,564,000.  At February 28,
1998, the marketable securities included approximately  $5,611,000 of the common
stock of  certain  financial  institutions,  $493,000  of  non-investment  grade
municipal bonds, and $430,000 of the common stock of Centennial Cellular,  which
had purchased certain cellular  partnership  interests from the Company in FY95.
This  portfolio  also  included  approximately   $2,467,000  reported  value  of
marketable  investments  in an emerging  Russian mutual fund, and a portfolio of
securities of companies located in the Ukraine and Poland. The reported value of
this  portfolio is reflected net of a valuation  reserve of $617,000,  which was
established  to address  liquidity and market  volatility  concerns  inherent in
those particular emerging markets.

During FY98,  the Company made  substantial  investments  in Russian and Eastern
European  markets,  including an investment with a recorded value of $980,000 in
AVISMA/VSMPO,  a Russian titanium producer whose stock does not currently have a
reported  market value due to the  relative  sparseness  in the stock's  trading
volume.  This  security  is  recorded  at its cost less a  valuation  reserve of
$245,000. Including this investment, the Company's investment of $835,000 in the
Institute for Automated Systems and the  above-reported  marketable  securities,
total  Russian  and  Eastern  European   investments  was  $4,282,000,   net  of
aforementioned  valuation reserves. This represents approximately 9.6% of assets
and 21.2% of total stockholders' equity.

During FY98, pursuant to shareholder approval,  the Company exchanged $4,311,000
of its 10 1/2%  Convertible  Subordinated  Debentures for an equal amount of new
notes which bear the same interest rate and conversion terms, but do not contain
restrictive  covenants  contained  in the original  issue.  The new notes have a
longer average maturity, with the final maturity date being in 2007. Pursuant to
this exchange,  the Company paid the remaining $456,000 of an Industrial Revenue
Bond and  $1,387,000  principal  value of the 10 1/2%  Debentures  that were not
tendered in the  exchange.  The exchange and  redemption  of the original  notes
resulted  in  the  elimination  of  a  restriction  concerning  the  payment  of
dividends. Accordingly, in February 1998, approximately $1,222,000 of previously
accrued but unpaid dividends on preferred stock were paid.

The Company also received the consent of its shareholders to change the terms of
its  Series  A  Cumulative  Convertible  Preferred  Stock  ("Preferred  Stock"),
including  elimination of the required  redemption terms and an amendment of the
dividend rate to a fixed annual amount of $1.50 per share, paid quarterly. Prior
to the change,  the Preferred Stock called for dividends based upon the earnings
of JM Ney  (including  the former  Dental and  Ultrasonics  Cleaning  segments).
Accordingly,  such dividends could range from a minimum of $0.75 per share, to a
maximum of $1.75 per share. For FY98, such dividends totaled $1.69 per preferred
share.

During FY98, JM Ney entered into a seven-year $7,500,000  subordinated note with
a  commercial  bank that bears  interest  at 10.26%  per annum.  JM Ney used the
proceeds to make distributions to the Company, pay down existing obligations and
fund  certain  capital  expenditures.  The  remaining  funds  and the  increased
availability  under  its  line of  credit  will be used for the  acquisition  of
another  business,  although no specific  transaction  has been  identified.  In
connection  with issuing this note,  JM Ney also granted the lender  warrants to
acquire  34,000  and 6,000  shares of its  common  stock at $1.00 and $10.00 per
share,  respectively.  Concurrent with this note agreement,  JM Ney also amended
the terms of its $6  million  revolving  credit  agreement  which  expanded  its
precious metals financing  options,  reduced JM Ney's interest rates for certain
borrowings  under  the  line,  and  amended  covenants  to  accommodate  the new
financing.

During  FY98,  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  $100 per ounce of the
palladium  content  of its  inventory,  and a $60 per ounce  decline in the gold
component of its  inventory,  JM Ney's LIFO reserve  increased by  $1,176,000 to
maintain the net recorded value of these inventories at their historical values.

As a result  of  covenants  contained  in its  borrowing  agreements,  JM Ney is
restricted from paying dividends or otherwise  transferring funds to the Company
outside the normal course of business,  except as defined in certain agreements.
At February 28, 1998, JM Ney's working capital and net worth, net of liabilities
to  the  Company,   totaled   approximately   $9.4  million  and  $6.8  million,
respectively.  The Company believes income  generated from its  investments,  or
funds generated from  liquidation of existing  investments and allowed  payments
from JM Ney will be sufficient to meet its anticipated  working capital and debt
service requirements for the foreseeable future.



<PAGE>


FORWARD LOOKING STATEMENTS
--------------------------

This report contains forward-looking  statements,  which are subject to a number
of risks, and  uncertainties  that may cause actual results to differ materially
from  expectations.  Those  uncertainties  include,  but are not  limited to the
following:

The Company has expanded its investment and business  development  activities in
Russia  and  Eastern  Europe.  Economic  and  political  developments  in  these
countries  could  significantly  impact  both the  return  on and the  return of
capital employed in these regions. Anticipated contingent consideration from the
sale of Ney Ultrasonics is dependent upon the successful marketing of technology
developed  while the Company owned Ney  Ultrasonics.  Changes in technology,  or
shortfalls  in the success of the buyer's  marketing of this  technology,  could
affect the ultimate  consideration  to be received.  The price and volatility of
precious  metals,  particularly  palladium and gold, could impact the market for
many of JM Ney's products as users substitute less expensive materials.

YEAR 2000
---------
The Year 2000  compliance  issues concern the inability of certain  computerized
information systems to properly recognize date-sensitive information as the Year
2000 approaches.  Systems that do not recognize such information  could generate
erroneous  data or cause systems to fail.  The Company has upgraded its hardware
and is in the process of installing a new version of its  software,  which among
other  benefits,  will result in the  Company  being Year 2000  compliant.  This
conversion is expected to be completed prior to the end of FY99. The Company has
also taken measures to ensure that other systems within its operations,  as well
as the interface with its customers,  suppliers and other vendors, are conducted
in a Year  2000  compliant  environment.  Approximately  $128,000  of costs  was
incurred  during FY98 for this  project.  The Company  estimates  that the costs
anticipated  to be  incurred  during  the  next  fiscal  year to  complete  this
conversion process will not exceed $300,000.




<PAGE>



ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statement schedules are filed as part of Part IV, Item 14, of this
Annual Report on Form 10-K.

The  Registrant's  Consolidated  Financial  Statements for the fiscal year ended
February 28, 1998 are set forth below.

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  for the fiscal year ended  February 28, 1998  contained in this Item
(amounts in thousands, except per share data).

Selected Quarterly Financial Data

<TABLE>
<CAPTION>
        1998 Quarterly Financial Data                  May 31           August 31        November 30          February 28
--------------------------------------------------- -----------       -------------    ---------------      ---------------
<S>                                                   <C>               <C>                <C>                  <C>  
Net sales and revenues                                $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 Diluted Common Share (1):
Continuing operations                                    .05               .78               (.21)               (.19)
Net income (loss)                                        .07               .79               (.16)               (.05)
--------------------------------------------------- ------------      -------------    ---------------    ----------------
</TABLE>
<TABLE>
<CAPTION>

        1997 Quarterly Financial Data                  May 31           August 31        November 30          February 28
--------------------------------------------------- -----------       -------------    ---------------    -----------------
<S>                                                   <C>               <C>                <C>                 <C>   
Net sales and revenues                                $6,694            $4,775             $3,942              $5,090
Gross profit                                           2,200             1,657              1,774               1,753
Income (loss) from continuing operations                 574              (376)              (855)                991
Net income (loss)                                        619              (374)              (941)                995
Income (loss) applicable to common shares                477              (474)            (1,027)              1,046
--------------------------------------------------- ------------      -------------   ----------------    -----------------
Earnings (Loss) Per Common Share:
Continuing Operations                                    .22              (.25)              (.49)               0.43
Net income (loss)                                        .25              (.25)              (.53)               0.43
--------------------------------------------------- -------------    --------------   -----------------   -----------------
</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>


ANDERSEN GROUP, INC.
Consolidated Balance Sheets 
February 28, 1998 and 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
                                                                                             1998                      1997
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>                       <C>  
Assets
Current assets:
Cash and cash equivalents                                                                  $2,516                    $3,219
Marketable securities                                                                       9,001                     5,345
Receivable from sale of subsidiary                                                          3,521                         -
Accounts and other receivables, less allowance for doubtful
accounts of $130 in 1998 and $190 in 1997                                                   3,870                     2,773
Inventories                                                                                 8,076                     9,040
Prepaid expenses and other assets                                                             142                       516
----------------------------------------------------------------------------------------------------------------------------
Total current assets                                                                       27,126                    20,893
-------------------------------------------------------------------------------------------------- ------------------------- 
Property, plant and equipment, net                                                          9,443                     9,336
Prepaid pension expense                                                                     4,665                     4,274
Investments                                                                                 1,815                     2,181
Other assets                                                                                1,722                       993
---------------------------------------------------------------------------------------------------------------------------- 
                                                                                          $44,771                   $37,677
---------------------------------------------------------------------------------------------------------------------------- 
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt                                                     $    595                   $   773
Short-term borrowings                                                                       2,183                     2,305
Accounts payable                                                                              951                     1,398
Accrued liabilities                                                                         3,352                     3,670
Deferred income taxes                                                                       1,286                       564
---------------------------------------------------------------------------------------------------------------------------- 
Total current liabilities                                                                   8,367                     8,710
---------------------------------------------------------------------------------------------------------------------------- 
Long-term debt, less current maturities                                                     4,459                     7,041
Subordinated note payable, net of unamortized discount                                      7,300                         -
Other long-term obligations                                                                 1,888                     1,121
Deferred income taxes                                                                       2,561                     2,267
Commitments and contingencies (Notes 17 and 20)
Redeemable cumulative convertible preferred stock,
  no par value; authorized 800,000 shares; issued
  789,628 shares;  outstanding shares 265,192 in 1997;
  unamortized discount of $81 in 1997; liquidation                                                                    4,891
  preference $18.75 per share                                                                  -
---------------------------------------------------------------------------------------------------------------------------- 
Stockholders' equity:
Cumulative convertible preferred stock, no par value;
authorized 800,000 shares, outstanding 256,416 shares                                       4,769                         -
Common stock, no par value; authorized 6,000,000 shares,
  issued 1,958,478 shares in 1998 and 1997                                                  2,103                     2,103
Treasury stock, at cost, 21,800 shares in 1998 and 24,000
  shares in 1997                                                                              (82)                      (90)
Additional paid-in capital                                                                  3,248                     3,248
Retained earnings                                                                          10,158                     8,386
---------------------------------------------------------------------------------------------------------------------------- 
---------------------------------------------------------------------------------------------------------------------------- 
Total stockholders' equity                                                                 20,196                    13,647
---------------------------------------------------------------------------------------------------------------------------- 
                                                                                          $44,771                   $37,677
---------------------------------------------------------------------------------------------------------------------------- 
See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


ANDERSEN GROUP, INC.
Consolidated Statements of Operations
Years ended February 28, 1998, 1997
and February 29, 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>

                                                               1998                   1997                  1996
--------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                   <C>                    <C>   
Revenues:
Net sales                                                   $25,397               $ 20,643               $18,624
Investment and other income (loss)                            3,471                   (142)                  813
-------------------------------------------------------------------------------------------------------------------------
                                                             28,868                 20,501                19,437
--------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales                                                17,040                 13,259                12,016
Selling, general and administrative                           6,260                  5,772                 7,683
Research and development                                      1,444                  1,228                 1,374
Interest expense                                              1,163                    790                 1,237
--------------------------------------------------------------------------------------------------------------------------
                                                             25,907                 21,049                22,310
--------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
  before income taxes                                         2,961                   (548)               (2,873)
Income tax expense (benefit)                                  1,191                   (882)                 (952)
--------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations                      1,770                    334                (1,921)
Income (loss) from discontinued Ultrasonics
  segment, net of income taxes (benefit) of
  $221, ($22) and ($214), respectively                          345                    (35)                 (349)
Gain on sale of discontinued Ultrasonics
  segment, net of income taxes of $84                            97                      -                     -
Income from discontinued Dental segment,
  net of  income taxes of $170                                    -                      -                   413
Gain on sale of discontinued Dental segment,    net
of income taxes of $2,041                                         -                      -                 3,790
--------------------------------------------------------------------------------------------------------------------------
Net income                                                    2,212                     299                1,933
Preferred dividend requirement                                 (477)                   (411)                (559)
Reversal of preferred dividends                                  37                     134                1,015
--------------------------------------------------------------------------------------------------------------------------
Income applicable to common shareholders                    $ 1,772                    $ 22              $ 2,389
--------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:
BASIC
  Continuing operations                                       $.69                     $.03               $ (.76)
  Discontinued operations                                      .18                     (.02)                 .03
  Gain on sales of discontinued segments                       .05                        -                 1.96
--------------------------------------------------------------------------------------------------------------------------
  Income per common share                                     $.92                     $.01               $ 1.23
--------------------------------------------------------------------------------------------------------------------------
DILUTED
  Continuing operations                                       $.68                     $.03               $ (.76)
  Discontinued operations                                      .18                     (.02)                 .03
  Gains on sales of discontinued segments                      .05                        -                 1.96
--------------------------------------------------------------------------------------------------------------------------
  Income per common share, diluted                            $.91                     $.01                $1.23
--------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


ANDERSEN GROUP, INC.
Consolidated Statements of Stockholders' Equity 
Years ended February 28, 1998, 1997
and February 29, 1996
(in thousands, except share data)

<TABLE>
<CAPTION>

                                                     1998             1997               1996
-------------------------------------------- ------------------ ------------------ -----------------
<S>                                              <C>              <C>                <C>   
Preferred Stock
Beginning balance                                      -                -                  -
Reclassification due to removal of
redemption provisions of preferred
stock                                               $4,769              -                  -
-------------------------------------------- ------------------ ------------------ -----------------
                                                    $4,769              -                  -
-------------------------------------------- ------------------ ------------------ -----------------
Common Stock, Outstanding Shares
  Beginning balance                              1,958,478        1,958,205          1,958,205
  Shares issued from prior
   conversion of preferred stock                       -                273                -
-------------------------------------------- ------------------ ------------------ -----------------
                                                 1,958,478        1,958,478          1,958,205
-------------------------------------------- ------------------ ------------------ -----------------
Common Stock
  Beginning balance                                 $2,103           $2,103             $2,103
  Shares issued from prior
   conversion of preferred stock                       -                -                  -
-------------------------------------------- ------------------ ------------------ -----------------
                                                  $2,103              $2,103            $2,103
-------------------------------------------- ------------------ ------------------ -----------------
Additional Paid-In Capital
  Beginning balance                               $3,248              $3,248            $1,924
  Gain from redemption of preferred
stock                                                 -                  -               1,324
-------------------------------------------- ------------------ ------------------ -----------------
                                                  $3,248              $3,248            $3,248
-------------------------------------------- ------------------ ------------------ -----------------
Retained Earnings
  Beginning balance                               $8,386              $8,364            $5,975
  Net income                                       2,212                 299             1,933
  Preferred stock dividend and
   accretion                                        (477)               (411)             (559)
  Reversal of preferred dividends and
   accretion                                          37                 134             1,015
-------------------------------------------- ------------------ ------------------ -----------------
                                                 $10,158              $8,386            $8,364
-------------------------------------------- ------------------ ------------------ -----------------
Treasury Stock
  Beginning balance                                 $(90)               $(90)             $(90)
  Shares issued, at identified cost                    8                                   -
-------------------------------------------- ------------------ ------------------ -----------------
                                                    $(82)               $(90)             $(90)
-------------------------------------------- ------------------ ------------------ -----------------
-------------------------------------------- ------------------ ------------------ -----------------
Total stockholders' equity                       $20,196             $13,647           $13,625
-------------------------------------------- ------------------ ------------------ -----------------
See accompanying notes to consolidated financial statements.

</TABLE>


<PAGE>



ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
Years ended February 28, 1998, 1997
and February 29, 1996
(in thousands)
<TABLE>
<CAPTION>
                                                                1998          1997          1996
----------------------------------------------------------- ------------- ------------- --------------
<S>                                                            <C>           <C>           <C>    
Cash flows from operating activities:
Net income                                                     $2,212        $  299        $1,933
Adjustments to reconcile net income to net cash used 
in operating activities:
Depreciation, amortization and accretion                        1,480         1,419         1,887
Deferred income taxes                                           1,016            67          (479)
Gain on sale of Dental segment                                     -             -         (3,790)
Gain on sale of Ney Ultrasonics                                   (97)           -             -
Losses (gains) from securities                                 (2,619)        1,149           (46)
Purchases of securities                                        (2,218)       (1,625)       (3,576)
Proceeds from sales of securities                               1,230           526         1,893
Pension (income) expense                                         (391)         (247)            8
Loss on disposal of property, plant and equipment                  -             58             1
Investment in Digital GraphiX                                      -            (87)          543
Changes in operating assets and liabilities, net of
changes from sale of Ney Ultrasonics in 1998 and sale of
Dental segment in 1996:
Accounts and notes receivable                                  (2,048)        1,564        (1,205)
Inventories                                                      (386)         (428)       (2,941)
Prepaid expenses and other assets                                 (97)         (339)         (806)
Accounts payable                                                  507        (1,799)        2,006
Accrued liabilities and other long-term obligations            (1,257)         (930)       (2,022)
----------------------------------------------------------- ------------- ------------- --------------
  Net cash used in operating activities                        (2,516)         (373)       (6,594)
----------------------------------------------------------- ------------- ------------- --------------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment                -              4           256
Purchase of property, plant and equipment                      (1,740)       (1,191)       (1,503)
Proceeds from sale of Dental segment, net of cash sold             -             -         16,848
Purchase of investments                                        (1,225)           -             -
Proceeds from collection of investments                         1,542            -             -
----------------------------------------------------------- ------------- ------------- --------------
  Net cash (used in) provided by investing activities          (1,423)       (1,187)       15,601
----------------------------------------------------------- ------------- ------------- --------------
Cash flows from financing activities:
Principal payments on long-term debt                           (2,760)       (1,250)         (642)
Proceeds from issuance of subordinated debt                     7,500            -             -
Redemptions of preferred stock                                   (160)         (392)       (3,758)
Proceeds (payment) of short-term borrowing, net                  (122)        2,305        (3,200)
Dividends paid                                                 (1,222)           -             -
----------------------------------------------------------- ------------- ------------- --------------
 Net cash provided by (used in) financing activities            3,236           663        (7,600)
----------------------------------------------------------- ------------- ------------- --------------
 Net (decrease) increase in cash and cash equivalents            (703)         (897)        1,407
 Cash and cash equivalents, beginning of year                   3,219         4,116         2,709
----------------------------------------------------------- ------------- ------------- --------------
 Cash and cash equivalents, end of year                        $2,516        $3,219        $4,116
------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


Notes to Consolidated Financial Statements
Years ended February 28, 1998, 1997
and February 29, 1996

(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, 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 of $617,000 at February 28, 1998
to provide for  volatility  and liquidity  concerns  relating to its  marketable
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.


<PAGE>


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 redeemable  convertible  cumulative preferred stock and
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 bases 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
diluted securities.  See Note 13 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.



<PAGE>


Financial Statement Presentation

Certain reclassifications, and the restatement of the Consolidated Statements of
Operations to reflect Ney  Ultrasonics  Inc. as a discontinued  operation due to
the sale of the net assets  effective  February 28, 1998,  have been made to the
FY97  and  FY96  financial   statements  in  order  to  conform  with  the  FY98
presentation.

(3)     Marketable Securities

Marketable securities consist of the following (in thousands):
<TABLE>
<CAPTION>

                                                                   February 28, 1998              February 28, 1997
                                                                   -----------------              -----------------
<S>                                                                      <C>                           <C>   
Common stock of savings banks                                            $5,611                        $3,508
Common stock of Centennial Cellular                                         430                           263
CA Emerging Russia Fund                                                   2,422                            -
Portfolio of Ukraine stocks                                                 314                            -
Common stock of Bank Handlowey                                              348                            -
Portfolio of Russian stocks                                                  -                            500
Valuation reserve - foreign investments                                    (617)                           -
Municipal bonds                                                             493                           488
Escrowed investments - sale of Dental segment                                 -                           586
                                                                         ------                        ------
                                                                         $9,001                        $5,345
                                                                         ------                        ------
</TABLE>

(4)    Inventories

Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>

                                        February 28, 1998      February 28, 1997
 -------------------------------------------------------------------------------
<S>                                            <C>                        <C>   
 Raw material                                  $2,989               $3,111
 Work in process                                6,509                3,877
 Finished goods                                   657                2,955
 -------------------------------------------------------------------------------
                                               10,155                9,943
 LIFO Reserve                                   2,079                  903
 -------------------------------------------------------------------------------
                                               $8,076               $9,040
 -------------------------------------------------------------------------------
</TABLE>

At February  28, 1998 and February  28,  1997,  inventories  valued at LIFO cost
comprised 79% and 64% of total inventories,  respectively. At February 28, 1998,
inventories  valued at LIFO consisted of 9,620 troy ounces of gold,  16,714 troy
ounces of silver,  3,448 troy  ounces of  platinum  and  16,713  troy  ounces of
palladium. Such quantities of precious metals are net of 5,000 ounces of silver,
558 ounces of platinum and 2,000 ounces of palladium,  which represents physical
quantities held but not owned by the Company's primary operating subsidiary, The
J.M.  Ney Company (JM Ney),  subject to leasing  arrangements  with the precious
metals  division of JM Ney's primary  bank. In addition,  as a hedge for certain
portions of its inventory, JM Ney at February 28, 1998 had short-term borrowings
of 732 troy  ounces  of gold,  2,000  ounces  of  silver  and  2,000  ounces  of
palladium.



<PAGE>


(5)    Discontinued Operations

Ney Ultrasonics Inc.

Effective  February 28, 1998, the Company sold the net assets of Ney Ultrasonics
Inc. for approximately  $3,521,000. As a result, the Company has recorded a gain
of $97,000,  net of expenses  relating to the  transaction  and income  taxes of
$84,000.  The  Company  expects to receive  additional  consideration,  which is
contingent on the growth of the sales of products and technology  transferred as
part of the sale.

The assets and liabilities sold are presented below (in thousands):

             Accounts receivable, net                             $  951
             Inventories                                           1,350
             Other current assets                                     63
             Property and equipment                                  246
             Other assets                                            153
                                                                  ------      
                                                                   2,763
             Accounts payable and accrued liabilities                242
                                                                  ------
             Net assets sold                                      $2,521

Ney  Ultrasonics'  results of  operations  have been  presented as  discontinued
operations.   Revenue  from  the  segment  totaled   approximately   $5,713,000,
$3,874,000 and $4,611,000 in FY98, FY97 and FY96, respectively.

Dental Segment

On November 28, 1995, the Company sold the assets and certain liabilities of its
Dental segment to Phoenix Shannon p.l.c. of Shannon,  County Clare,  Ireland and
recorded a gain of $3,790,000,  net of expenses, and income taxes of $2,041,000.
The Company  received $18.5 million in cash,  part of which,  under the terms of
the sale, was used to purchase  200,000  Phoenix  Shannon  Ordinary Shares and a
two-year,  interest-bearing note for $1 million. Included in the gain on sale is
an increase of $519,000 in prepaid pension expense from a curtailment gain which
arose as a result of the transfer of the employees of the Dental  segment to the
new employer.

During FY97, the $1 million note and the remaining  value of the Phoenix Shannon
ordinary  shares were written off,  resulting  in charges to  investment  income
totaling $2,175,000.

The  results  of  operations  of the  Dental  segment  have  been  presented  as
discontinued  operations.  Revenue from this segment totaled approximately $29.6
million during FY96.



<PAGE>


(6)    Property, Plant and Equipment

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

                                                             February 28, 1998              February 28, 1997
------------------------------------------------------ ------------------------------ ------------------------------
<S>                                                               <C>                            <C>    
Land and improvements                                             $1,056                         $ 1,054
Buildings and improvements                                         9,392                           8,783
Machinery and equipment                                           10,539                          10,188
Furniture and fixtures                                               867                             921
------------------------------------------------------ ------------------------------ -------------------------------
                                                                  21,854                          20,946
Less accumulated depreciation and
  amortization                                                    12,411                          11,610
------------------------------------------------------ ------------------------------ -------------------------------
                                                                  $9,443                         $ 9,336
------------------------------------------------------ ------------------------------ -------------------------------
</TABLE>

     Depreciation  and  amortization  expense  was  $1,405,000,  $1,393,000  and
$1,797,000 in FY98, FY97 and FY96, respectively.

At both February 28, 1998 and February 28, 1997,  property,  plant and equipment
includes  $1,146,000 of machinery and equipment  acquired under capital  leases,
which expire through FY02, with related  allowances for depreciation of $728,000
and $493,000, respectively.

(7)      Investments

Investments consist of the following (in thousands):
<TABLE>
<CAPTION>

                                                              February 28, 1998             February 28, 1997
--------------------------------------------------------- --------------------------- ------------------------------
<S>                                                                <C>                           <C>    
Investment in Institute for Automated Systems                      $   835                       $   835
Investment in AVISMA                                                   980                            -
Investment in Digital GraphiX, Incorporated                             -                          1,346
--------------------------------------------------------- --------------------------- -------------------------------
                                                                   $ 1,815                       $ 2,181
--------------------------------------------------------- --------------------------- -------------------------------
</TABLE>

Digital GraphiX Incorporated

Prior  to a May 1995  offering  of its  common  stock,  DGI was a  wholly  owned
subsidiary of the Company.  After the transaction,  the Company's  ownership was
diluted  to 19%,  after  which  time the  investment  in DGI  stock and debt was
recorded using lower of cost or market accounting.

During  FY97,  the  Company  reduced  its  investment  in DGI through the formal
discharge  of DGI's  obligation  to repay $2.2  million of a note  payable,  and
recorded a corresponding  income tax benefit.  During FY97, as part of a plan to
position DGI for ultimate sale, the Company  invested an additional  $250,000 to
purchase DGI common shares which  increased the recorded value of its investment
to $1,346,000.

In FY98,  the net  assets  of DGI  were  sold.  Through  payments  of debts  and
preferred stock and liquidating  distributions  on its common stock, the Company
was able to realize its carrying value and recognize a gain of $196,000.

Institute for Automated Systems

At both  February 28, 1998 and February 28, 1997,  the Company had an investment
of $835,000 in a joint  venture,  which has an equity  interest in the Institute
for Automated  Systems, a Russian  telecommunications  company that has plans to
develop a data transmission network throughout Russia. Costs expended in FY98 to
develop  this  investment  were  expensed  in  the  Consolidated   Statement  of
Operations.

The Company's  President and another  Director are among a group of investors in
this joint venture.

AVISMA

During FY98, the Company invested  approximately  $1,225,000 in the common stock
of AVISMA, a Russian titanium producer. This investment is being recorded at its
cost,  net of a valuation  allowance  of  $245,000.  Excluded  from the recorded
balance  are shares with a cost basis of  approximately  $775,000  purchased  by
three of the Company's  directors and an  investment  fund  controlled by one of
these  directors.  Such shares are being held by the Company for  administrative
convenience pending the issuance of new shares to be issued in connection with a
merger of AVISMA into VSMPO, a Russian titanium processing company.

(8)     Short-term Borrowings

J.M. Ney has a $6.0 million demand  revolving  credit and deferred payment sales
agreement  with two  commercial  banks.  At  February  28,  1998,  $696,000  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
8.5% and 8.25% at February 28, 1998 and February 28, 1997,  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, 1998 the amount of net assets which JM Ney was  restricted  from
distributing to the Company totaled approximately $10,808,000.

In addition,  at February 28,  1998,  the Company had a $1,487,000  demand loan,
which  was  secured  by a  portion  of the  Company's  portfolio  of  marketable
securities. Interest on this borrowing was charged at 7.75%.



<PAGE>


(9)    Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                 February 28, 1998                      February 28, 1997
--------------------------------------- ------------------------------------ ----------------------------------------
<S>                                                    <C>                                    <C>  
Employee compensation                                $  449                                 $  628
Accrued dividends                                       112                                    934
Income taxes                                            201                                     51
Accrued interest                                        314                                    265
Deferred hedging gains                                  346                                     42
Other                                                 1,930                                  1,750
--------------------------------------- ------------------------------------ ----------------------------------------
                                                     $3,352                                 $3,670
--------------------------------------- ------------------------------------ ----------------------------------------
</TABLE>

(10)   Long-term Debt and Subordinated Notes Payable

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

                                                                       February 28, 1998          February 28, 1997
-------------------------------------------------------------------- ---------------------- --- ----------------------
<S>                                                                        <C>                       <C>
Mortgage note payable, interest at 5.4%,
  paid February 1998                                                       $    -                     $   575
Convertible subordinated debentures, due
  October 2002; redeemed or exchanged in
  February 1998                                                                 -                       6,287
Convertible subordinated debentures, due October
  2007; interest at 10.5%, payable  semi-annually;
  annual principal payments in varying amounts
  through maturity; unsecured                                                4,311                        -
Subordinated note payable of JM Ney due
  December 2004; unsecured; quarterly interest
  payments at 10.26%                                                         7,500                        -
Other                                                                          743                        952
-------------------------------------------------------------------- ----------------------     ----------------------
                                                                            12,554                      7,814
Less unamortized discount on subordinated
  note payable                                                                 200                         -
-------------------------------------------------------------------- ----------------------     ----------------------
                                                                            12,354                      7,814
Less current maturities                                                        595                        773
-------------------------------------------------------------------- ----------------------     ----------------------
                                                                           $11,759                     $7,041
-------------------------------------------------------------------- ----------------------     ----------------------
</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, 1998,  266,604 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 lender has an option to put the warrant  back to J.M. Ney
at the earlier of  December  2002 or the date of an initial  public  offering of
J.M. 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):

                                  1999                            $    595
                                  2000                                 569
                                  2001                                 542
                                  2002                                 548
                                  2003                                 443
                               Thereafter                            9,857
                                                                   -------
                                                                   $12,554


(11)   Income Taxes

For FY98, FY97 and FY96, income tax expense (benefit)  consists of the following
(in thousands):

<TABLE>
<CAPTION>

Fiscal Years                                 1998                 1997                  1996
------------                            -------------------- --------------------- ------------------
<S>                                       <C>                   <C>                 <C>    
Current Federal                           $   350               $(410)              $   360
Current State                                 130                (561)                  296
Deferred Federal                              940                  62                   360
Deferred State                                 76                   5                    29
                                        -------------------- --------------------- ------------------
                                           $1,496               $(904)               $1,045
                                        -------------------- --------------------- ------------------
</TABLE>

The  difference  between the actual income tax expense  (benefit) and the income
tax expense (benefit) 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>
                                                               1998                  1997                1996
                                                        -------------------- --------------------- ------------------
<S>                                                           <C>                   <C>                 <C>   
Income tax expense (benefit)                                  $1,261                $(206)              $1,012
State income taxes, net of Federal benefit                       206                  107                  196
Change in enacted tax rates                                       -                  (264)                  -
Change in valuation allowance                                     -                    -                  (483)
Adjustment of accrual for prior years' taxes                      -                   546                  319
Other                                                             29                    5                    1
------------------------------------------------------- -------------------- --------------------- ------------------
                                                              $1,496                $(904)              $1,045
------------------------------------------------------- -------------------- --------------------- ------------------
</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.



<PAGE>


     The principal  components of the net deferred tax asset  (liability)  as of
February 28, 1998 and February 28, 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            1998                     1997
                                                                   ----------------------- --------------------------
<S>                                                                       <C>                      <C>    
Deferred tax liabilities:
Fixed asset basis differences                                             $(1,229)                 $(1,288)
Inventory                                                                  (1,486)                  (1,443)
Pension                                                                    (1,726)                  (1,581)
Unrealized gains on marketable securities, net                               (470)                      -
Installment sale                                                              (30)                    (207)
------------------------------------------------------------------ ----------------------- --------------------------
Total deferred tax liabilities                                             (4,941)                  (4,519)
------------------------------------------------------------------ ----------------------- --------------------------
Deferred tax assets:
Post-retirement benefits other than pensions                                  395                      415
Unrealized losses on marketable securities, net                                -                       177
Allowance for uncollectible receivables                                        48                      440
Federal credit carry-forwards                                                 337                      302
Other                                                                         314                      354
------------------------------------------------------------------ ----------------------- --------------------------
Total deferred tax assets                                                   1,094                    1,688
------------------------------------------------------------------ ----------------------- --------------------------
Net deferred tax liabilities                                              $(3,847)                 $(2,831)
------------------------------------------------------------------ ----------------------- --------------------------
</TABLE>

At February 28, 1998 and 1997 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, 1998
the Company had  $337,000 of Federal  credit  carry-forwards,  $156,000 of which
were  attributable to the alternative  minimum tax and have no expiration  date.
The remaining credits, totaling $181,000, expire from 1999 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 dividend rate of $1.50 per preferred  share and to eliminate
the mandatory redemption feature of the Preferred Stock.

During FY98,  FY97 and FY96,  the Company  purchased  8,776,  24,283 and 299,561
shares, respectively, of its Preferred Stock at $18.25 per share in FY98, $16.15
per share in FY97,  and at $12.25 per share in FY96. The FY98 and FY97 purchases
were part of a repurchase program, while in FY96 purchases were made under terms
of a voluntary tender offer. As a result of the purchases,  the Company reversed
accrued dividends and accreted discounts of $37,000,  $134,000 and $1,015,000 in
FY98,  FY97  and  FY96,  respectively.  In  addition,  in  FY96,  $1,324,000  of
additional  paid-in  capital was  recorded to reflect the  discount of the total
purchase cost,  including  expenses,  from the original issue cost of the shares
purchased.

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,  $1.24,  and $.78 per preferred  share of dividends  were accrued  during
FY98, FY97, and FY96, respectively.

The preferred shares increase in carrying value at a rate of approximately  $.26
per share per year and, as such, approximately $40,000, $58,000, and $137,500 of
accretion were recorded as part of the preferred dividend  requirement for FY98,
FY97 and FY96, respectively.

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, 1998, 496,165 shares of common stock have been reserved for conversion.

(13)    Earnings Per Share

The  computation  of base and  diluted  earnings  per  share is as  follows  (in
thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                      1998              1997              1996
--------------------------------------------------------------- ------------------ ---------------- -----------------
<S>                                                                  <C>              <C>               <C>   
Numerator for basic and diluted earnings per share
Income applicable to common shareholders                             $1,772           $   22            $2,389
--------------------------------------------------------------- ------------------ ---------------- -----------------
Denominator for basic earnings per share -
  weighted average shares                                             1,935            1,934             1,934
Effect of dilutive securities - stock options                            18              -                -
--------------------------------------------------------------- ------------------ ---------------- -----------------
Denominator for diluted earnings per share                            1,953            1,934             1,934
--------------------------------------------------------------- ------------------ ---------------- -----------------
Basic earnings per share                                               $.92             $.01             $1.23
Diluted earnings per share                                             $.91             $.01             $1.23
--------------------------------------------------------------- ------------------ ---------------- -----------------
</TABLE>

For each of FY98, FY97 and FY96 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.

(14)   Stock Option Plans

The  Company's  incentive  stock  option  plan  provides  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. In addition, during FY97, a stock option plan was
put into effect under which options to acquire  shares of JM Ney were granted in
both FY98 and FY97. The per share  weighted  average fair value of stock options
granted in 1998 under the JM Ney Plan was $6.22.  The per share weighted average
fair value of stock  options  granted in 1997 under the Company and JM Ney plans
were $2.08 and $4.95, respectively on the dates of grant using the Black Scholes
option pricing model with the following weighted average  assumptions:  expected
dividend yield of 0%;  risk-free  interest rate of 6.5%;  expected life of seven
years; and expected volatility of 33.3%.



<PAGE>


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  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 proforma  amounts
indicated below (amounts in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                 1998                  1997
                                                                        ----------------------- --------------------
<S>                                                                             <C>                   <C>   
Net income (loss) applicable to common shareholders:
   As reported                                                                  $1,772                $  22
   Pro forma                                                                    $1,581                $ (68)

Earnings (loss) per share - diluted:
   As reported                                                                    $.91                 $.01
   Pro forma                                                                      $.81                $(.03)
</TABLE>

The assumption  regarding the stock options issued during FY98 and FY97 was that
such  options vest over  periods  ranging from one to three years.  Proforma net
income  reflects  only  options  granted in FY98 and FY97.  Therefore,  the full
impact of calculating  compensation cost for stock options under SFAS No. 123 is
not reflected in the proforma amounts because the compensation  cost for options
granted prior to FY97 is not considered.

The Company  reserved  149,700  shares of common stock for the exercise of stock
options.  At February 28, 1998,  the Company had 70,500  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 3,700 were available for issuance at
February 28, 1998.

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

<TABLE>
<CAPTION>
                                                  Number              Weighted Average              Range of
          Outstanding Options                   of Shares              Exercise Price           Exercise Prices
---------------------------------------- ------------------------- ------------------------ -------------------------
<S>                                               <C>                       <C>                    <C>     <C>  
Balance at February 28, 1995                      77,300                    $8.40                  $6.50 - $9.50
Canceled                                         (37,600)                   $9.06                  $7.00 - $9.00
---------------------------------------- ------------------------- ------------------------ -------------------------
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                    $4.95                  $3.81 - $8.38
---------------------------------------- ------------------------- ------------------------ -------------------------
</TABLE>

At February 28,  1998,  the range of exercise  prices and the  weighted  average
remaining contractual life of the options was as follows:


<PAGE>


<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
                                            Options Outstanding                           Options Exercisable
--------------------------------------------------------------------------------------------------------------------
                                                                  Weighted 
                                              Weighted            Average                               Weighted
    Range of                                  Average            Remaining                              Average
    Exercise                Number            Exercise           Contractual          Number            Exercise 
     Prices              Outstanding           Price               Life              Exercisable         Price
--------------------- ------------------ ------------------ --------------------- ----------------- ----------------
<S>     <C>                 <C>                <C>               <C>                    <C>              <C>  
$8.38 - $7.75                8,000             $8.22             3.0 years              8,000            $8.22
$7.00 - $5.38               22,900             $6.22             5.8 years             22,900            $6.22
        $3.81               48,300             $3.81             8.1 years             45,800            $3.81
--------------------- ------------------ ------------------ --------------------- ----------------- ----------------
                            79,200             $4.95             6.9 years             76,700            $4.99
--------------------- ------------------ ------------------ --------------------- ----------------- ----------------
</TABLE>

Also, during FY98 and FY97,  options to purchase 16,800 and 130,000 shares of JM
Ney,  at  exercise  prices of $10.86  and $10.00  per share  respectively,  were
issued. During FY98, options to acquire 500 shares of JM Ney at $10.00 per share
were forfeited. At February 28, 1998, 38,841 of the 146,300 total outstanding JM
Ney options  were  exercisable.  At February  28,  1998,  the Company  owned all
850,000 outstanding shares of JM Ney. There presently is no public market for JM
Ney's common stock.

(15)   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 plan  assets,  which are managed by  third-party  trustees,  include  equity
securities,  government  and corporate  debt  securities  and other fixed income
obligations.

The following table sets forth the actuarially  determined  funded status of the
Company's  defined  benefit  plan  and  amounts   recognized  in  the  Company's
Consolidated Balance Sheets (in thousands):
<TABLE>
<CAPTION>
                                                                    February 28, 1998          February 28, 1997
--------------------------------------------------------------- -------------------------- --------------------------
Actuarial present value of benefit obligations:
<S>                                                                      <C>                        <C>   
     Vested                                                              $ 9,145                    $8,970
     Non-vested                                                               72                        68
--------------------------------------------------------------- -------------------------- --------------------------
Accumulated benefit obligation                                             9,217                      9,038
Effect of projected compensation increases                                   995                        983
--------------------------------------------------------------- -------------------------- --------------------------
Projected benefit obligation                                              10,212                     10,021
Plan assets at fair value                                                 18,087                     16,815
--------------------------------------------------------------- -------------------------- --------------------------
Plan assets in excess of projected benefit obligation                      7,875                      6,794
Unrecognized prior service cost                                             (131)                      (141)
Unrecognized net gain on plan assets                                      (3,079)                    (2,379)
--------------------------------------------------------------- -------------------------- --------------------------
Prepaid pension expense                                                  $ 4,665                     $4,274
--------------------------------------------------------------- -------------------------- --------------------------
</TABLE>


For FY98,  FY97 and FY96, the projected  benefit  obligations and pension income
were determined using the following assumptions:
<TABLE>
<CAPTION>

Fiscal Years                                                   1998                 1997                1996
------------                                           -------------------- ------------------- --------------------
<S>                                                            <C>                  <C>                 <C> 
Discount rate                                                  7.5%                 7.5%                7.5%
Future compensation growth rate                                5.5%                 5.5%                5.5%
Long-term rate of return on plan assets                        9.0%                 8.0%                8.0%

</TABLE>
Net pension expense  (income) for the Company's  funded defined benefit plan for
FY98, FY97 and FY96 includes the following components:
<TABLE>
<CAPTION>

Fiscal Years                                                    1998                1997                 1996
------------                                            ------------------- ------------------- --------------------
<S>                                                           <C>                 <C>                  <C>  
Service cost of benefits accrued                              $  234               $ 253                $ 341
Interest cost on projected benefit obligations                   736                 723                  806
Return on plan assets                                         (2,294)             (2,190)              (2,130)
Unrecognized net gain                                            933                 967                  991
------------------------------------------------------- ------------------- ------------------- --------------------
Pension (income) expense                                      $ (391)             $ (247)               $   8
------------------------------------------------------- ------------------- ------------------- --------------------
</TABLE>

In  addition,  as  discussed  in Note 4, during  1996  prepaid  pension  expense
increased by $519,000 as a result of the curtailment gain recorded in connection
with the sale of the net assets of the Dental segment.

The Company also has a supplemental  defined benefit plan, which covers a former
senior  executive of JM Ney.  There are no assets held by the plan.  At February
28, 1998 and February 28, 1997, the  actuarially  determined  status of the plan
and the amount  recognized  in the balance  sheet was a vested  accumulated  and
projected   benefit   obligation   of   approximately   $284,000  and  $314,400,
respectively.  For FY98,  FY97,  and FY96, a discount  rate of 7.5% was used for
determining the projected benefit obligation.

Pension expense for all defined  contribution plans totaled $122,000,  $121,000,
and $143,000 in FY98, FY97 and FY96, respectively.

(16)   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 FY98,
FY97 and FY96 was approximately  $56,000,  $53,000,  and $55,000,  respectively,
including interest.  At February 28, 1998 and February 28, 1997, the accumulated
benefit obligation for post-retirement  benefits was approximately  $803,000 and
$823,000,  respectively.  At  February  28,  1998,  32 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 both February 28, 1998 and February 28,
1997, respectively.  At February 28, 1998 and February 28, 1997, the accumulated
benefit obligation was compiled using assumed health care cost trend rates of 9%
and 10%, respectively  gradually declining to 5% in the year 2001 and thereafter
over the projected payout period of the benefits.

The estimated effect on the present value of the accumulated  benefit obligation
at March 1, 1998 of a 1%  increase  each year in the health care cost trend rate
used would  result in an  estimated  increase  of  approximately  $61,000 in the
obligation.

(17)   Leases

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.
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 $264,000,
$209,000,  and $240,000 for FY98,  FY97,  and FY96,  respectively,  while rental
income  totaled  $376,000,  $342,000,  and  $281,000 for FY98,  FY97,  and FY96,
respectively.

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

                                   Lease Payments                  Rental Income
         1999                            $284                          $412
         2000                             179                           215
         2001                             125                           102
         2002                             117                            -
         2003                              88                            -
         Thereafter                       106                            -
         -----------------------------------------------------------------------

(18)   Business Segments and Export Sales

During FY98, 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.  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>
<CAPTION>

                                                                          FY98           FY97           FY96
                                                                          ----           ----           ----
<S>                                                                    <C>            <C>             <C>   
     Net sales and revenues:
      Electronics                                                      $25,397        $20,643        $16,544
      Video Products                                                      ----          ----           2,080
      Corporate                                                          3,471           (142)           813
                                                                  -------------   ------------   ------------
                                                                       $28,868        $20,501        $19,437
                                                                  -------------   ------------   ------------
    Operating income (loss):
      Electronics                                                       $2,860         $2,589        $ 1,612
      Video Products                                                      ----           ----           (177)
      Corporate                                                          1,264         (2,356)        (3,071)
                                                                  -------------   ------------   ------------            
                                                                        $4,124        $   242        $(1,636)
                                                                  -------------   ------------   ------------
    Interest expense:
      Electronics                                                      $   468       $     13            379
      Corporate                                                            695            777            858
                                                                  -------------   ------------   ------------
                                                                        $1,163        $   790        $ 1,237
                                                                  -------------   ------------   ------------
    Identifiable assets:
      Electronics                                                      $25,337        $22,467        $20,886
      Ultrasonics                                                         ----          1,798          1,911
      Corporate                                                         19,434         13,412         16,001
                                                                  -------------   -----------   ------------
                                                                       $44,771        $37,677        $38,798
                                                                  -------------   -----------   ------------
    Depreciation and amortization:
      Electronics                                                       $1,126        $ 1,142         $1,363
      Ultrasonics                                                          139             95             76
      Corporate                                                            215            240            230
                                                                  -------------   ------------  ------------
                                                                        $1,480         $1,477         $1,669
                                                                  -------------   ------------  ------------
    Capital expenditures:
      Electronics                                                       $1,597         $1,512         $1,239
      Ultrasonics                                                          109            234             66
      Corporate                                                             34             24            123
                                                                  -------------   ------------  ------------
                                                                        $1,740         $1,770         $1,428
    ------------------------------------------------------------- -------------   ------------  ------------
</TABLE>

Export  sales  for  FY98,  FY97  and  FY96  were  $4,370,000,   $3,417,000,  and
$2,560,000,  respectively. Such sales were made primarily to customers in Europe
and the Pacific Rim.

During FY98 sales to two  customers  accounted for 14.9% and 12.6% of net sales.
Sales to a third  customer  during FY97  accounted for 10.3% of net sales during
that year. No single customer accounted for more than 10% of sales during FY96.

(19)   Estimated Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents,  accounts receivable, 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, 1998, JM Ney owned futures contracts to purchase 5,500 ounces of
palladium  through  June 1998 at an average  price of $217.87,  which had a fair
market value of $61,000.  The value of these  contracts has not been recorded at
February 28, 1998, as these  contracts  have been  purchased to hedge firm price
orders.  In  addition,  gains  totaling  $346,000  from  expired or sold futures
contracts have been deferred from income recognition until the underlying orders
have been shipped.

The carrying value of short-term  borrowing equals fair value as it reflects the
market  value of the  corresponding  precious  metals in which the  liability is
denominated, or is at current market rates.

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.

(20)    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.

(21)    New Accounting Standards

Reporting Comprehensive Income

Statement of Financial  Accounting  Standards No. 130,  Reporting  Comprehensive
Income  ("SFAS  130") was  issued in June 1997 and is  effective  for  financial
statements  beginning  after  December 15, 1997. The statement  establishes  new
standards for reporting and display of  comprehensive  income and its components
(revenues,  expenses,  gains,  and  losses)  in a full  set  of  general-purpose
financial  statements.  The  impact  of SFAS 130 on future  financial  statement
presentations will be to show comprehensive income.

Segment Reporting

Statement of Financial  Accounting Standards No. 131, Disclosures about Segments
of an Enterprise  and Related  Information  ("SFAS 131") was issued in June 1997
and is effective for financial  statements  beginning  after  December 15, 1997.
This  Statement   establishes   standards  for  the  way  that  public  business
enterprises  report  information  about operating  segments in annual  financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas,  and major  customers.  Management has not yet determined the
impact of SFAS 131 on future financial statement presentations.



(22)    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):

                                     1998              1997               1996
                                     ----              ----               ----
        Cash paid for
           Interest                $1,129              $863              $1,203
           Income taxes, net        $ 360              $ 85              $1,410

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.

As discussed in Note 5,  effective  February 28, 1998,  the Company sold the net
assets of Ney Ultrasonics Inc. No consideration had been paid as of February 28,
1998, and accordingly the effects of this  transaction have not been included in
the Consolidated  Statements of Cash Flow. During March 1998,  $2,400,000 of the
consideration was received and an additional  $500,000 was placed in escrow. The
remaining  portion of the purchase  price is expected to be received  during the
second quarter of FY99.



<PAGE>


Independent Auditors' Report

Deloitte and Touche LLP Letterhead


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

We have audited the accompanying  consolidated  balance sheet of Andersen Group,
Inc.  and  subsidiaries  as of February  28,  1998 and the related  consolidated
statements of operations,  stockholders' equity and cash flows for the year 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 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, 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, 1998, and the results of their  operations and
their cash flows for the year then ended in conformity  with generally  accepted
accounting principles.



/s/ Deloitte & Touche LLP


Hartford, Connecticut
April 16, 1998


<PAGE>

Independent Auditors' Report

KPMG Peat Marwick LLP Letterhead


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

We have audited the accompanying  consolidated balance sheet of Andersen Group,
Inc.  and  subsidiaries  as of February  28,  1997 and the related  consolidated
statements of operations,  common and other stockholders' equity, and cash flows
for the years ended February 28, 1997 and February 29, 1996. 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, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Andersen Group, Inc.
and  subsidiaries at February 28, 1997, and the results of their  operations and
their cash  flows for the years  ended in  conformity  with  generally  accepted
accounting principles.


                                                       /s/KPMG Peat Marwick 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, 1998.

                                    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,  1998,  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, 1998.

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, 1998.

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, 1998.


<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, 1998 and 1997                                   20
        Consolidated Statements of Operations
          for the years ended February 28, 1998, 1997 and
          February 29, 1996                                                  21
        Consolidated Statements of Stockholders' Equity
          for the years ended February 28, 1998, 1997
          and February 29, 1996                                              22
        Consolidated Statements of Cash Flows
          for the years ended February 28, 1998, 1997
          and February 29, 1996                                              23
        Notes to Consolidated Financial Statements                         24-40
        Independent Auditors' Reports                                      41-42

(a)2.  Consolidated Financial Statement Schedules:

        Schedule
        I  Condensed Financial Information                            F-1 to F-5
        II Valuation and Qualifying Accounts                                F-6

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:

Exhibit
  No.                Description
-------              -----------

3.1 Second Amended and Restated Certificate of Incorporation of the Registrant.*
 
3.2   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).

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  Agreement  dated as  of December 29, 1997 by and among The J.M.
      Ney Company ("Borrower"), BankBoston, N.A. (Successor by merger to Bank of
      Boston Connecticut)("BankBoston") and Rhode Island Hospital Trust National
      Bank ("RIHT" and, collectively, with BankBoston, the "Banks") with respect
      to a  Certain Revolving Credit and  Deferred Payment Sales Agreement dated
      as of October 8, 1996 by and among the Borrower and the Banks.*
     
21.   Subsidiaries of the Registrant.*

23.   Consent of Deloitte & Touche LLP.*

27.1  Financial Data Schedule.*

27.2  Restated Financial Data Schedule.*

27.3  Restated Financial Data Schedule.*

(b)     Reports on Form 8-K.
        A Form 8-K was  filed on  December  29,  1998  reporting,  under  Item 4
        "Changes  in  Registrant's  Certifying  Accountant",  a  change  in  the
        Company's independent certified public accountants. An amendment to Form
        8-K was filed on  January 9, 1998  filing a copy of the letter  received
        from KPMG Peat Marwick.


*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.

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

/s/ Oliver R. Grace, Jr.                      /s/ Andrew M. O'Shea
-------------------------                     ---------------------
Oliver R. Grace, Jr., Principal               Andrew M. O'Shea, Principal 
 Executive Officer                             Financial and Accounting Officer

May 28, 1998                                  May 29, 1998

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
                                     
/s/ Francis E. Baker                  Chairman, Secretary         May 26, 1998
--------------------                  and
Francis E. Baker                      Director

                                                     
/s/ Oliver R. Grace, Jr.              President, Chief            May 28, 1998
------------------------              Executive Officer
Oliver R. Grace, Jr.                  and Director

/s/ Peter N. Bennett                  Director                    May 24, 1998
--------------------                                                  
Peter N. Bennett                       

/s/ John S. Grace                     Director                    May 27, 1998
-----------------                                                            
John S. Grace                                     

/s/ Louis A. Lubrano                  Director                    May 29, 1998
--------------------                                   
Louis A. Lubrano                              

/s/ James J. Pinto                    Director                    May 27, 1998
------------------                                                             
James J. Pinto                                   


<PAGE>



Deloitte and Touche LLP Letterhead


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, 1998 and for the year then ended,  and have
issued  our  report  thereon  dated  April 16,  1998;  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 as of and
for the year ended February 28, 1998. These 1998 financial  statement  schedules
are the  responsibility of the Company's  management.  Our  responsibility is to
express  an opinion  based on our audit.  In our  opinion,  such 1998  financial
statement schedules,  when considered in relation to the basic 1998 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 16, 1998


<PAGE>


KPMG Peat Marwick LLP Letterhead


The Board of Directors and Stockholders
Andersen Group, Inc.

Under date of April 8, 1997, we  reported on the  consolidated  balance sheet of
Andersen  Group,  Inc. and  subsidiaries as of February 28, 1997 and the related
consolidated  statements of operations,  common and other stockholders'  equity,
and cash flows for the years ended  February 28, 1997 and February 29, 1996,  as
contained  in  the  1998  annual  report  to  stockholders.  These  consolidated
financial statements and our report thereon are included in the Annual Report on
Form  10-K for  1998.  In  connection  with  our  audits  of the  aforementioned
consolidated  financial  statements,  we  also  audited  the  related  financial
statement  schedules as listed in the accompanying index as of February 28, 1997
and for the years ended February 28, 1997 and February 29, 1996. These financial
statement  schedules are the  responsibility  of the Company's  management.  Our
responsibility is to express an opinion on these financial  statement  schedules
based on our audits.

In  our  opinion,  such  1997  and  1996  financial  statement  schedules,  when
considered  in  relation  to the  basic  1997  and 1996  consolidated  financial
statements  taken as a whole,  present  fairly,  in all material  respects,  the
information set forth therein.



                                                       /s/KPMG Peat Marwick LLP
                                                       ------------------------

Hartford, Connecticut
April 8, 1997



<PAGE>
                                      F-1


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

                            Condensed Balance Sheets
                           February 28, 1998 and 1997
                             (amounts in thousands)
<TABLE>
<CAPTION>
                                                                                     1998                          1997
------------------------------------------------------------------------- ---------------------------- --------------------------
<S>                                                                                  <C>                         <C>   
Assets
Current assets:
Cash and cash equivalents                                                            $ 1,441                     $ 2,304
Marketable securities                                                                  9,001                       5,345
Receivable from sale of subsidiary                                                     3,521                          -
Accounts and other receivables, less allowance for doubtful
accounts                                                                                 125                          53
Prepaid expenses and other assets                                                          5                         390
------------------------------------------------------------------------- ---------------------------- --------------------------
Total current assets                                                                  14,093                       8,092
------------------------------------------------------------------------- ---------------------------- --------------------------
Investment in The J. M. Ney Company                                                     6,604                     15,107
Subordinated note receivable from The J.M. Ney Company                                  4,000                         -
Investment in Digital GraphiX, Incorporated                                                -                       1,346
Property, plant and equipment, net                                                      2,629                      2,748
Other assets                                                                            2,711                      1,225
------------------------------------------------------------------------- ---------------------------- --------------------------
                                                                                      $30,037                    $28,518
------------------------------------------------------------------------- ---------------------------- --------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings                                                                 $ 1,487                    $    -
Current maturities of long-term debt                                                      441                        586
Accounts payable                                                                          297                        101
Due to The J. M. Ney Company                                                              656                        316
Accrued liabilities                                                                     1,728                      1,765
Deferred income taxes                                                                     161                        564
------------------------------------------------------------------------- ---------------------------- --------------------------
Total current liabilities                                                               4,770                      3,332
------------------------------------------------------------------------- ---------------------------- --------------------------
Long-term debt, less current maturities                                                 4,124                      6,540
Other long-term liabilities                                                               596                         -
Deferred income taxes                                                                     351                        108
Commitments and contingencies (Note 7)
Redeemable cumulative convertible preferred stock,
    no par value; authorized 800,000 shares; issued
    789,628 shares; outstanding 265,192 shares;
    liquidation preference $18.75 per share                                                -                       4,891
------------------------------------------------------------------------- ---------------------------- --------------------------
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                         -
Common stock, no par value; authorized 6,000,000
shares,                     issued 1,958,478 shares                                     2,103                      2,103
Additional paid-in capital                                                              3,248                      3,248
Retained earnings                                                                      10,158                      8,386
------------------------------------------------------------------------- ---------------------------- --------------------------
                                                                                       20,278                     13,737
Treasury stock, at cost, 21,800 shares in 1998 and 24,000 in 1997                         (82)                       (90)
------------------------------------------------------------------------- ---------------------------- --------------------------
Total stockholders' equity                                                             20,196                     13,647
------------------------------------------------------------------------- ---------------------------- --------------------------
                                                                                      $30,037                    $28,518
------------------------------------------------------------------------- ---------------------------- --------------------------
See accompanying notes to condensed financial information.
</TABLE>

                                


<PAGE>
                                      F-2


                              ANDERSEN GROUP, INC.
                   Schedule I Condensed Financial Information
                                Of the Registrant

                       Condensed Statements of Operations
                     Years ended February 28, 1998 and 1997
                  (amounts in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                       1998                                1997
------------------------------------------------------- ----------------------------------- ------------------------------------
<S>                                                                  <C>                                <C>    
Revenues:
Investment and other income                                          $3,691                              $  267
------------------------------------------------------- ----------------------------------- ------------------------------------

Costs and expenses:
General and administrative                                            2,223                               2,280
Interest expense                                                        694                                 777
------------------------------------------------------- ----------------------------------- ------------------------------------
                                                                      2,917                               3,057
------------------------------------------------------- ----------------------------------- ------------------------------------
Income (loss) from continuing operations
     before income taxes and equity in earnings
     of The J.M. Ney Company                                            774                              (2,790)
Income tax expense (benefit)                                            361                              (1,778)
------------------------------------------------------- ----------------------------------- ------------------------------------
Income (loss) from continuing operations
    before equity in earnings of
    The J.M. Ney Company                                                413                              (1,012)
Equity in earnings of The J.M. Ney Company                            1,357                               1,346
------------------------------------------------------- ----------------------------------- ------------------------------------
Income from continuing operations                                     1,770                                 334
Income from discontinued operations
    net of income taxes                                                 345                                 (35)
Gain on sale of discontinued segment
    net of income taxes                                                  97                                  -
------------------------------------------------------- ----------------------------------- ------------------------------------
Net income                                                            2,212                                 299
Preferred dividend requirement                                         (477)                               (411)
Reversal of preferred dividend                                           37                                 134
------------------------------------------------------- ----------------------------------- ------------------------------------
Income applicable to common shares                                   $1,772                              $   22
------------------------------------------------------- ----------------------------------- ------------------------------------
Earnings (loss) per common share:
BASIC
    Continuing operations                                            $ 0.69                              $ 0.03
    Discontinued operations                                            0.18                               (0.02)
    Gain on sale of discontinued segment                               0.05                                0.00
------------------------------------------------------- ----------------------------------- ------------------------------------
    Net income                                                       $ 0.92                              $ 0.01
------------------------------------------------------- ----------------------------------- ------------------------------------
DILUTED
    Continuing operations                                            $ 0.68                              $ 0.03
    Discontinued operation                                             0.18                               (0.02)
    Gain on sale of discontinued segment                               0.05                                0.00
------------------------------------------------------- ----------------------------------- ------------------------------------
    Net income                                                       $ 0.91                              $ 0.01
------------------------------------------------------- ----------------------------------- ------------------------------------
See accompanying notes to condensed financial information.
</TABLE>


                              


<PAGE>
                                      F-3

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

                       Condensed Statements of Cash Flows
                     Years ended February 28, 1998 and 1997
                             (amounts in thousands)
<TABLE>
<CAPTION>
                                                                         1998                            1997
----------------------------------------------------------- ------------------------------- --------------------------------
<S>                                                                     <C>                             <C>    
Cash flows from operating activities:
Net income                                                             $2,212                          $  299
Adjustments to reconcile net income to net cash 
  used in operating activities:
Equity in earnings of The J. M. Ney Company                            (1,357)                         (1,346)
Equity in earnings of Ney Ultrasonics                                    (345)                             35
Depreciation, amortization and accretion                                  216                             167
Deferred income taxes                                                     880                             105
Gain on sale of Ney Ultrasonics                                           (97)                             -
Net (gains) losses  from securities                                    (2,619)                          1,149
Purchases of securities                                                (2,218)                         (1,625)
Proceeds from sales of securities                                       1,230                             526
Investment in Digital GraphiX                                              -                              (87)
Changes in operating assets and liabilities
Accounts and notes receivable                                             (72)                            652
Prepaid expenses and other assets                                         372                            (184)
Accounts payable, accrued liabilities and other
  long-term obligations                                                  (409)                           (654)
----------------------------------------------------------- ------------------------------- --------------------------------
Net cash used in operating activities                                  (2,207)                           (963)
----------------------------------------------------------- ------------------------------- --------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment                                 (34)                             (7)
Proceeds from collection of investments                                 1,542                              -
Investment in other assets                                             (1,225)                             -
----------------------------------------------------------- ------------------------------- --------------------------------
Net cash provided by (used in) investing activities                       283                              (7)
----------------------------------------------------------- ------------------------------- --------------------------------
Cash flows from financing activities:
Principal payments on long-term debt                                   (2,561)                         (1,178)
Proceeds from short-term debt                                           1,486                              -
Redemption of preferred stock                                            (160)                           (392)
Dividends paid                                                         (1,222)                             -
Dividends received from The J. M. Ney Company                           3,518                           1,150
----------------------------------------------------------- ------------------------------- --------------------------------
 Net cash provided by (used in) financing activities                    1,061                            (420)
----------------------------------------------------------- ------------------------------- --------------------------------
 Net decrease in cash and cash equivalents                               (863)                         (1,390)
 Cash and cash equivalents, beginning of year                           2,304                           3,964
----------------------------------------------------------- ------------------------------- --------------------------------
 Cash and cash equivalents, end of year                                $1,441                          $2,304
----------------------------------------------------------- ------------------------------- --------------------------------
Supplemental disclosure of cash flow information
Cash paid for:
 Interest                                                              $  766                          $  803
 Income taxes, net                                                     $  360                          $   85
----------------------------------------------------------- ------------------------------- --------------------------------
See accompanying notes to condensed financial information.
</TABLE>
                               

<PAGE>
                                       F-4

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

                    Notes to Condensed Financial Information
                           February 28, 1998 and 1997
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 two banks in
October 1996 and was  subsequently  amended  December 30, 1997,  which contained
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  include  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. In addition, during FY97
JM Ney paid the Registrant interest for the cost of capital used by JM Ney. Also
during the last two months of FY98,  JM Ney paid the  Registrant  interest  on a
junior  subordinated note, and a management fee, which will extend into 1999. 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.  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 will be at the annual rate of $500,000.  Thereafter, the retainer
will  increase by $100,000 per year.  The  agreement  runs through  November 30,
2002.

NOTE 3 - SHORT TERM BORROWINGS
At February 28, 1998,  the Registrant  had a $1,487,000  demand loan,  which was
secured  by a portion  of the  Company's  portfolio  of  marketable  securities.
Interest on this borrowing was charged at 7.75%.

NOTE 4 - LONG TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
                                                                          February 28, 1998             February 28, 1997
                                                                     ----------------------------- -----------------------------
<S>                                                                            <C>                           <C>                    
Mortgage note payable; Interest at 5.4%, paid February 1998                        -                         $  575
Convertible subordinated debentures, due October 2002;
     redeemed or exchanged in February 1998                                        -                          6,287
Convertible subordinated debentures, due October 2007;
     interest at 10.5%, payable semi-annually; annual
     principal payments in varying amounts through                             $4,311                            -
maturity, unsecured
Other                                                                             254                           264
                                                                     ----------------------------- -----------------------------
                                                                                4,565                         7,126
Less current maturities                                                           441                           586
                                                                     ----------------------------- -----------------------------
                                                                               $4,124                        $6,540
                                                                     ----------------------------- -----------------------------
</TABLE>

                                     

<PAGE>
                                      F-5

     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, 1998,  266,604 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):

                     1999                             $   441
                     2000                                 441
                     2001                                 442
                     2002                                 443
                     2003                                 443
                     Thereafter                         2,355
                                                      ---------
                                                      $ 4,565
                                                      ---------


NOTE 5 - CUMULATIVE CONVERTIBLE PREFERRED STOCK

See Note 12 to the Registrant's Consolidated Financial Statements for the fiscal
year ended February 28, 1998 contained in Item 8 herein.

NOTE 6 - CASH DIVIDENDS

The amount of cash dividends paid to the Registrant by Consolidated Subsidiaries
during fiscal years 1998 and 1997 was  approximately  $3,518,000 and $1,150,000,
respectively.

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>
                                      F-6

                              Andersen Group, Inc.
                 Schedule II - Valuation and Qualifying Accounts
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                    -----Additions-----------
                                            Balance         Charged to           Charged                               Balance
                                           beginning         costs and          to other                                 end
    Description                             of year          expenses            account        Deductions             of year
-------------------------------------------------------------------------------------------------------------------------------
February 28, 1998
<S>                                           <C>               <C>             <C>               <C>                   <C>
Allowance for doubtful
    accounts                                  $190               17             (36) (d)          (41) (a)              $ 130
Reserve for returns                           $ 95                                                                      $  95
Warranty reserve                              $ 70              (40)            (30) (d)                                $   0
------------------------------------------------------------------------------------------------------------------------------

February 28, 1997
Allowance for doubtful
    accounts                                  $124               76                               (10) (a)              $ 190
Reserve for returns                           $  0               95                                                     $  95
Warranty reserve                              $100              (30)                                                    $  70
------------------------------------------------------------------------------------------------------------------------------

February 29, 1996
Allowance for doubtful
    accounts                                  $360               97            (287) (b)          (46)(a)               $124
Warranty reserve                              $ 65               35                                                     $100
Discontinued operation                        $ 63                                                (63) (c)              $  0
Deferred income tax
    valuation allowance                       $483             (483)                                                    $  0
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(a) Write offs net of recoveries.
(b) Transferred in connection with sale of certain assets of Dental Segment. (c)
Eliminated in connection with reduction in stock ownership of Digital GraphiX in
     May 1995.
(d)  Transferred  in  connection  with sale of  certain  assets  of  Ultrasonics
segment.










                                    



<PAGE>
                                      E-1


                                  EXHIBIT INDEX


Exhibit
  No.    Description                                                    Page No.
-------  -----------                                                    --------

 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

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

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

10.12    Amendment Agreement dated as of December 29, 1997 by and among
         The J.M. Ney Company ("Borrower"), BankBoston, N.A. (Successor
         by merger to Bank of Boston Connecticut)("BankBoston") and Rhode 
         Island Hospital Trust National Bank ("RIHT" and, collectively,
         with BankBoston, the "Banks") with respect to a Certain
         Revolving Credit and Deferred Payment Sales Agreement dated as
         of October 8, 1996 by and among the Borrower and the Banks.       E-6

21.      Subsidiaries of the Registrant.                                   E-7

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

27.1     Financial Data Schedule.                                          E-9

27.2     Restated Financial Data Schedule.                                 E-10

27.3     Restated Financial Data Schedule.                                 E-11