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

         [ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                 EXCHANGE ACT OF 1934 [NO FEE
                 REQUIRED]

                 For the fiscal year ended February 28, 1997             
                 or

         [   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
                  SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         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 or organization) (I.R.S
Employer Identification No.)

             1280 Blue Hills Avenue, Bloomfield, Connecticut 06002-1374
                      (Address of principal executive offices)
(Zip Code)

             Registrant's telephone number, including area code: (860) 242-0761

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

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

                                          Common Stock Without Par Value
                                                 (Title of Class)
                            10-1/2% Convertible Subordinated Debentures Due 2002
                                                 (Title of Class)

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. [ X ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  based upon the average bid and asked  prices of the Common  Stock on
May 9, 1997, as reported on the NASDAQ National Market System, was approximately
$5,310,000. 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 9, 1997, there were 1,934,478 shares of Common Stock, 
without par value, outstanding.
                                       DOCUMENTS INCORPORATED BY REFERENCE:
                               Parts I and  III:  Portions  of the  Registrant's
                               Proxy Statement for its 1997 Annual Meeting
                               of   Shareholders   The  exhibit  index  is
                               located on page E-1




<PAGE>


                                                      PART I

ITEM 1.     BUSINESS.

1 (a) Introduction. (i) 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.

Since 1991 the  Registrant's  primary  investment has been The J. M. Ney Company
(Ney) which operated in two industry segments: Electronics,  consisting of Ney's
electronics and ultrasonics  divisions,  and Dental.  In November 1995, Ney sold
the  assets  and  certain  liabilities  of  the  Dental  segment.  In  1997  the
ultrasonics  division  of Ney was  classified  as a  separate  industry  segment
(Ultrasonic  Cleaning  Equipment).  In addition to the  investment in Ney, since
April 1993, the Registrant held an investment in Digital  GraphiX,  Incorporated
(DGI), a video graphics  company.  As discussed in more detail below,  under the
heading "Other  Investments",  DGI sold substantially all of its assets in April
1997 and is currently in the process of winding up its affairs.

As part of a strategic  reorganization  of the Company,  effective  June 1, 1997
Oliver R. Grace, Jr., the Company's Chairman,  will become President and Francis
E. Baker, the Company's President,  will become Chairman. It is anticipated that
the Company's  principal  executive  offices will be relocated to New York,  New
York,  and that the Company will  increasingly  make  minority,  non-controlling
investments in operating companies.

1  (b)  Industry  Segment  Information.   Financial  information  regarding  the
Company's  industry  segments  is  contained  in  Note  16 to  the  Registrant's
Consolidated  Financial  Statements  for the fiscal year ended February 28, 1997
contained in Item 8 herein.

1 (c) Narrative  Description of Business.  During the fiscal year ended February
28, 1997,  the  Registrant  held  investments  in companies that operated in two
business segments, Electronics and Ultrasonics. In addition, the Registrant held
interests  in a video  graphics  company and in a company  with plans to develop
data transmission  networks  throughout the Commonwealth of Independent  States.
The Company also holds a portfolio of marketable  securities comprised primarily
of the common stock of certain financial institutions.

Electronic Segment

The  Electronics  segment,  which  consists  of  the  operations  of  Ney,  is a
full-service,   precious  metal  and  parts  supplier  to  automotive,  medical,
industrial  electronics,  military and semi-conductor  manufacturers.  The fully
integrated approach of Ney 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.
<PAGE>
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,  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.  Ney designs and builds the necessary molds and
tools as well as designs and  manufactures  the end product.  By controlling the
total  process  Ney  has  a  competitive   advantage  over  other  companies  in
technology,  cost and response time. Ney has attained ISO 9001 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 addition,
QS9000 certification was received in May, 1997.

In  connection  with the sale of the assets  and  liabilities  of the  Company's
Dental segment in November,  1995,  Ney entered into a three year  manufacturing
agreement to alloy and fabricate  precious metals for Ney Dental  International,
Inc. (NDI), the purchaser of Ney's dental  business.  As part of this agreement,
the Company  agreed,  for a ten-year  period,  not to sell alloys,  equipment or
merchandise  into the dental  market that NDI serves.  The Company 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.

Ney's business has limited direct  competition with regard to the manufacture of
low amperage precious 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.  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.

Ney sells to more than 800 customers,  with approximately 85% of its sales being
made to  customers  in the  United  States.  Ney's  sales are made  domestically
through  both  field  sales and  manufacturers'  representatives  located in key
geographic   markets.   Internationally,   Ney  sells   through   manufacturers'
representatives, independent distributors and original equipment manufacturers.

No  customer  in the  Electronics  segment  accounted  for more  than 10% of the
Registrant's consolidated sales in fiscal 1997.

Ultrasonics Segment

The Ultrasonics segment, which consists of Ney's majority owned subsidiary,  Ney
Ultrasonics  Inc.  (Ney  Ultrasonics),  has  focused  on working  with  high-end
electronic,  semi-conductor,  disk-drive,  medical and  aerospace  customers  to
provide the advanced capabilities of patented ultrasonic cleaning technology and
to increase its market  penetration.  Ney Ultrasonics'  products have become the
preferred  choice  in  ultrasonics  for  numerous  OEM  system  integrators  and
fabricators.
<PAGE>
Ney's  EnviroSONIK(TM)  and  Torrent(TM)  cleaning  systems  continue to replace
equipment  and  processes  that use  ozone-depleting  chemicals  which are being
phased  out under  mandates  of  provisions  in the  Clean Air Act of 1990.  Ney
Ultrasonics is the exclusive licensee,  pursuant to a license agreement,  of the
patented ultrasonic technology used in its products.  These products are capable
of cavitating some of the newer  replacement  chemistries  and also  incorporate
technologies that eliminate damage to microminiature components typically caused
by ultrasonic equipment produced by other manufacturers.

Ney Ultrasonics competes with a number of national and regional companies on the
basis of cleaning performance,  price and delivery. Ney Ultrasonic's  generators
carry a  three-year  general  warranty  which is not  generally  offered  by its
competitors.

No  customers  in the  Ultrasonics  segment  accounted  for more than 10% of the
Registrant's consolidated sales in fiscal 1997.

Other Investments

During fiscal 1997 the Company  increased its interest in DGI, a video  graphics
company, by acquiring additional Common Stock, and by converting a note from DGI
into shares of DGI's Series A Preferred Stock. DGI was formerly wholly owned and
comprised the Company's  Video Products  segment from April 1993 to May 2, 1995.
In April 1997 DGI sold substantially all of its assets and received the approval
of its  shareholders  to  liquidate.  Also in April 1997, as part of the plan of
liquidation, DGI redeemed the shares of its Series A Preferred Stock held by the
Company.  The  liquidation  will occur  during  fiscal 1998 and be  completed by
February 1998. For further  information on the  Registrant's  investment in DGI,
see Note 17 to the Company's  Consolidated  Financial  Statements for the fiscal
year  ended  February  28,  1997  contained  in  Item  8  herein,   and  Certain
Relationships and Related Transactions in Item 13.

The  Company  also  holds an  investment  in Treglos  Investments,  LTD, a joint
venture  which is  investing  in 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 17 to the  Company's  Consolidated  Financial
Statements  for the fiscal  year ended  February  28, 1997  contained  in Item 8
herein, and Certain Relationships and Related Transactions in Item 13.

Research and Development

During fiscal years 1997, 1996, and 1995, research and development  expenditures
totaled approximately $1,472,000, $1,683,000 and $2,587,000, respectively.

Sources and Availability of Raw Materials and  Components

The Company  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. The Company
believes that its sources of supply are adequate for its continuing needs.
<PAGE>

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,  1997,  the  Registrant,  including  all  subsidiaries,  had 193
full-time  employees  and 1  part-time  employee.  None of these  employees  are
represented by a labor union,  and the Registrant is not aware of any organizing
activities.  Neither the Registrant nor any of its  subsidiaries has experienced
any  significant  work  stoppage  due  to any  labor  problems.  The  Registrant
considers its employee relations to be satisfactory.

Executive Officers of the Registrant

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>
Oliver R. Grace, Jr.              43     Chairman                                                          1990
Francis E. Baker                  67     President and Secretary                                           1959
Robert P. Belcher                 48     Treasurer and Chief Financial Officer                             1996
Bernard F. Travers, III           39     Assistant Secretary                                               1993
Ronald N. Cerny                   45     President, The J.M. Ney Company                                   1993
Andrew M. O'Shea                  38     Treasurer and Chief Financial Officer,
                                              The J.M. Ney Company                                         1995
Eugene Phaneuf                    50     Vice President - Operations,
                                              The J.M. Ney Company                                         1995
------------------------------- -------- ----------------------------------------------------------- -----------------
</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. None of the executive officers of the Company
are related to any of the Directors.

Mr. Grace,  Jr. has been a Director of the Company since 1986 and Chairman since
March 29, 1990. 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. Effective June 1, 1997, Oliver R. Grace, Jr. will become President of
the Company and Mr. Baker will become Chairman. 
<PAGE>
Mr. Baker has been a Director of the Company and  President of the Company since
1959. In May 1997, Mr. Baker became Secretary of the Company.  Effective June 1,
1997, Mr. Baker will become Chairman and Secretary of the Company.

Mr. Belcher  joined the Company in August 1996 as Treasurer and Chief  Financial
Officer.  From  December  1996 to May 1997,  Mr.  Belcher was also the Company's
Secretary.  From July  1994 to July  1996 Mr.  Belcher  was a  Principal  at the
management firm of Booz-Allen & Hamilton, Inc. From 1988 to 1994 Mr. Belcher was
the  Executive   Vice-President  of  Trinity  Capital  Corporation,   a  venture
capital/investment company.

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 Ney since  November 16, 1995.  From April
1993 to November  1995, Mr. Cerny was the General  Manager of Ney's  Electronics
Division.  From  1988  until  joining  Ney,  Mr.  Cerny  served as  Director  of
Operations  (1990-1993) and Director of Sales & Marketing (1988 to 1990) for the
Materials  Technology  Division  of Johnson  Matthey,  Inc.,  a precious  metals
fabricator.  

Mr. O'Shea joined the Company in December 1995 as Treasurer and Chief  Financial
Officer  of  Ney.  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 Vice-President, Finance and Administration. Mr.
O'Shea is a Certified Public Accountant

Mr. Phaneuf joined Ney in 1990. He was promoted to Vice  President-Operations of
Ney in March  1996.  From April 1994 to  February  1996,  Mr.  Phaneuf was 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 Ney's
Manager of Engineering and Manufacturing.

ITEM 2.  PROPERTIES.  The Company's  principal  executive  offices are currently
located in a 108,000  square  foot  building  in  Bloomfield,  Connecticut.  The
Registrant  leases portions of this facility to its subsidiary,  Ney Ultrasonics
and its former subsidiaries,  NDI and DGI, as well as to third parties. See Note
10 to the Company's Consolidated Financial Statements for the fiscal year ending
February 28, 1997,  contained  in Item 8, for a discussion  of the  indebtedness
related to this property.  The Company  anticipates  that during the fiscal year
ended  February 28, 1998 it will  relocate its  principal  executive  offices to
leased  space in New York,  New York.  Ney owns a 100,000  square foot  facility
within  a 16.5  acre  industrial  park in  Bloomfield,  Connecticut.  This  site
contains the principal  operations of the Electronics  segment and Ney's 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. 
<PAGE>
ITEM 3. LEGAL PROCEEDINGS. As previously reported in the Company's Form 10-Q for
the quarter  ended August 31, 1996, in July 1996,  two  companion  lawsuits were
filed in the United States District Court for the district of New Jersey, MORTON
INTERNATIONAL,  INC. V. A.E. STALEY MFG. CO. ET AL, and VELSICOL  CHEMICAL CORP.
V. A.E. STALEY MFG. CO. ET AL, in which Morton and Velsicol assert cost recovery
and contribution  claims pursuant to the Comprehensive  Environmental  Response,
Compensation  and  Liability  Act (CERCLA)  against  approximately  95 companies
relating  to the  Ventron/Velsicol  Superfund  Site  located  in Wood  Ridge and
Carlstadt,  New Jersey (Site). On December 31, 1996, Morton and Velsicol filed a
First Amended  Complaint,  alleging an alternative basis for liability under the
Resource  Conservation  and Recovery Act (RCRA).  Specifically,  the  plaintiffs
allege that Ney is a generator of  hazardous  substances  which were  ultimately
processed at the Site and contributed to the alleged  contamination at the Site.
The suits, which duplicate each other, in all material aspects,  seek to recover
the  plaintiff's  unspecified  past and future costs of remediation of the Site.
The  investigation at the Site to determine the extent of contamination  has not
been completed and no plan for remediation  has been  developed.  The plaintiffs
have not been able to provide the  defendants  with any  confirmed  figures with
respect to past costs and no figures at all for its future costs.  On January 3,
1997, the defendants, including Ney, filed a Motion to Dismiss both Morton's and
Velsicol's  Complaints  based upon the statue of limitations  and the New Jersey
doctrine of entire controversy. On April 15,1997, the Court denied the motion of
the defendants to dismiss the case. Initial  disclosure of information  relating
to the claims  asserted in the complaints were made by plaintiffs and defendants
in January,  1997.  In  addition,  two  depositions  of former  employees of the
operators of the Site were taken  earlier this year.  Based on this  preliminary
information, Ney is one of the smaller parties to have had any transactions with
one of the plaintiff's predecessors in interest. However, at this time, there is
insufficient  information  to determine the  appropriate  allocation of costs as
between or among the defendants group, if liability to the generator  defendants
is ultimately proven. 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.  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.  During the fiscal year ended  February  28,  1997,  the
Company  settled a lawsuit with one of its business  partners in connection with
the  unauthorized  transfer  of shares in a Russian  telecommunications  company
held, indirectly by the Company through intermediary  companies.  The Settlement
Agreement  requires  the  return  of shares  in the  Russian  telecommunications
company held by one of the intermediary companies. ITEM 4. SUBMISSION OF MATTERS
TO A VOTE OF SECURITY  HOLDERS.  On December 5, 1996,  the Company  paid off the
remaining outstanding principal balance of its 1979 Industrial Development Bonds
(IDBs) thereby allowing the waivers which had been received, as described in the
following paragraph, to become effective. In November 1996, the Company received
the  consent  of the  holders  of its 1983 IDBs and of the  holders of its 10.5%
Convertible Subordinated Debentures due 2002 (Debentures) to waive compliance by
the Company with certain covenants contained in the indentures applicable to the
1983 IDBs and to the Debentures.  The waivers received permit the Company to (1)
purchase from time to time, from or through  brokers or dealers,  through direct
negotiated  transactions,  in the open market, in block transactions,  by tender
offer or otherwise,  shares of (a) the Company's Series A Cumulative Convertible
Preferred Stock,  without par value (Preferred  Stock), and (b) (i) if no shares
of the Preferred Stock are  outstanding,  shares of the Company's  Common Stock,
without par value (Common  Stock),  or (ii) if any shares of the Preferred Stock
are  outstanding,  shares of the Common Stock with the consent of the holders of
the Preferred  Stock; in each case for such purchase prices as determined by the
Company, but not to exceed $6.0 million in the aggregate for all such purchases,
and (2) make payments for any shares of capital  stock so purchased.  A majority
of the non-affiliated holders of the Debentures (approximately  $3,100,000) gave
their consent to the waiver. There was approximately $4,531,000 principal amount
of the non-affiliated  holders of the Debentures  outstanding at the time of the
consent solicitation.
<PAGE>  

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 9, 1997 was 700 and 1100, respectively.  During
fiscal year 1997 the  Registrant did not pay any cash  dividends.  The Company's
high and low 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.
                 
 Year ended February 28,          High                    Low
         1997
 First Quarter                 $ 6 1/2                  $ 3 3/4
 Second Quarter                  7                        5 1/4
 Third Quarter                   7                        3 1/4
 Fourth Quarter                  6 1/2                    5
                   

                   
 Year ended                       High                    Low
February 29, 1996
                   
  First Quarter                 $ 6 1/4                  $3
  Second Quarter                  6 1/4                  4 3/4
  Third Quarter                   5 1/4                  3
  Fourth Quarter                  6 1/2                  3 3/4
                   

The  Indenture  relating  to the  Company's  10  1/2%  Convertible  Subordinated
Debentures  contains a covenant  which  restricts  payment of  dividends  on, or
repurchases or redemptions  of, the Company's  capital stock.  See discussion of
the Restrictive  Covenants  under the heading - Liquidity and Capital  Resources
contained in  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations in Item 7 herein,  and Notes 9 and 10 of the  Registrant's
Consolidated  Financial  Statements  for the fiscal year ended February 28, 1997
contained in Item 8.


<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, 1997 contained
in Item 8, (amounts in thousands, except per share data).
<TABLE>
<CAPTION>
------------------------------------ ---------------- ---------------- -------------- ---------------- ----------------
Years ended February                      1997             1996            1995            1994             1993
------------------------------------ ---------------- ---------------- -------------- ---------------- ----------------
<S>                                      <C>              <C>            <C>              <C>               <C>         
Revenues1                                $24,375          $24,048        $28,866          $21,015           $15,629
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Income (loss) from continuing
Operations                                   299          (2,270)        (1,159)          (1,634)           (1,474)
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Net Income (loss)                            299            1,933          (388)            (868)           (2,685)
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Income (loss) applicable to
Common shares                                 22            2,389          (975)          (1,468)           (3,355)
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Income (loss) from continuing
Operations per common share                  .01            (.94)          (.90)           (1.22)            (2.45)
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Income (loss) per common
Share, primary                               .01             1.23          (.50)           (0.80)            (1.89)
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Depreciation, amortization
and accretion                              1,419            1,887          2,329            3,368             3,287
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Total assets                              37,677           38,798         43,679           48,590            52,337
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Total debt                                10,119            8,485         12,328           16,371            17,723
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Redeemable preferred stock                 4,891            5,280         10,593           10,494            10,684
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Common and other stockholders'
equity                                    13,647           13,625          9,913           10,837            11,482
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
Book value per common share                 7.05             7.04           5.13             5.62              6.46
------------------------------------ ---------------- ---------------- -------------- ---------------- -----------------
</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 
for FY 1996 exclude the results of  operations  of the  Company's  Dental  
segment as a result of its sale in November 1995.


<PAGE>


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

RESULTS OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1997 VS YEAR ENDED FEBRUARY 29, 1996
Revenues
Total  revenues of  $24,375,000  during the fiscal year ended  February 28, 1997
(FY97)  represent an increase of 1.4% from the  $24,048,000  recorded during the
year ended  February  29, 1996  (FY96).  This  modest  increase  represents  the
combination of increased sales from the Electronics  segment,  losses  sustained
from  investments in Phoenix  Shannon,  p.l.c. and the absence of sales from the
Company's formerly consolidated Video Products segment.

Sales from the  Electronics  segment  totaled  $20,643,000  during  FY97,  which
represents a 24.8% increase over the $16,544,000 recorded during FY96. Increased
sales in medical,  automotive and other industrial markets,  which resulted from
expansion of capabilities and effective  marketing  efforts,  coupled with sales
from fabrication  services to the Company's former Dental segment,  produced the
sales  growth.  Sales from the  Ultrasonics  segment  during FY97 of  $3,874,000
represents a 16.0% decrease from the prior year. A slowdown in the semiconductor
industry resulted in fewer shipments in the third and fourth quarters,  although
bookings  strengthened  for the  segment in the fourth  quarter.  Sales from the
formerly consolidated Video Products segment totaled $2,080,000 during the first
two months of FY96.  Due to an offering of the common stock of Digital  GraphiX,
Incorporated (DGI), the Company's ownership was diluted,  and its results beyond
that date were not consolidated with those of the Company.  Accordingly,  during
FY97, this segment did not generate any reportable 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 a complete  writeoff  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 on
Phoenix Shannon's common stock due to a decline in its market value.

Gains from  common  stocks,  which  primarily  comprise  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.
Interest  income of $342,000 in FY97 was 27.1% lower than the $469,000  recorded
in  FY96  primarily  due 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 preferred  stock during
the year,  and no accruals  of  dividend  income  were  recorded.  In  addition,
management fees received constitutes $200,000 of other income in FY97.

Cost of Sales
Cost of sales totaled  $15,469,000 in FY97, an increase of 0.5% from FY96.  Cost
of  sales  represented  63.1%  and  66.3%  of  net  sales  for  FY97  and  FY96,
respectively.  The 3.2%  improvement in gross margin rates is  attributable to a
16.3% improvement in rates within the Ultrasonics segment and a 1.5% improvement
within the Electronics segment.
<PAGE>


Selling, General and Administrative Expenses
Selling,  general and  administrative  expenses of  $7,249,000  during FY97 were
20.9%  lower  than the  $9,166,000  of such  expenses  reported  for  FY96.  The
writedown  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 the Company's former subsidiary, Seratronics, Inc., which has since been
liquidated,  account for most of the higher costs in FY96. Selling,  general and
administrative expenses totaled 29.7% of revenues in FY97 versus 38.1% in FY96.

Research and Development Expenses
Research  and  development   expenses  decreased  from  $1,683,000  in  FY96  to
$1,472,000 in FY97.  Without the expenses from the former Video Products segment
for two months in FY96,  the  current  year  amount  would have  represented  an
increase of 10.2%.  Such expenses  represented 6.0% of net sales in FY97, versus
7.2% for FY96,  due primarily to the  relatively  higher level of these expenses
within the Video Products segment.

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

Income Tax Benefit
An income tax benefit of $904,000 was recorded  during FY97 due to the operating
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  $1,166,000
relating to the loss from continuing operations was recorded in FY96.

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 relates
to fewer preferred shares outstanding due to purchases in the fourth quarters of
both  FY96 and  FY97.  Dividends  per  preferred  share,  which are based on the
consolidated  operating income (as defined) of The J. M. Ney Company,  increased
from  $.78  in  FY96  to  $1.24  in FY97  due to  improvement  in the  operating
performance of the Electronics and Ultrasonics segments.

Net Income
For FY97, the Company reported net income of $299,000. After preferred dividends
and the reversal of preferred  dividends due to the  repurchase  of shares,  net
income  was  $22,000  or $.01  per  share,  versus a net  loss  from  continuing
operations applicable to common shareholders of $1,814,000,  or $0.94 per share,
in FY96. The FY 96 results also benefitted from a gain on the sale of the Dental
segment and the results of operations from that segment for  approximately  nine
months. These factors added $4,203,000 or $2.17 per share, of income to make net
income for FY96 total $2,389,000, or $1.23 per share.


<PAGE>



YEAR ENDED FEBRUARY 29, 1996 VS. YEAR ENDED FEBRUARY 28, 1995
Revenues
Total  revenues of  $24,048,000  during the fiscal year ended  February 29, 1996
(FY96)  declined by 16.7% from the  $28,866,000  recorded  during the year ended
February  28, 1995 (FY95).  This decline  represents  the  combination  of sales
growth in the  Electronics  segment,  the  removal  of the  results of the Video
Products segment from consolidation  during FY96, and lower levels of investment
income.

Sales from the  Electronics  segment  totaled  $16,544,000  during  FY96,  which
represented a 17.5% increase over the $14,079,000 of sales recorded during FY95.
Growth came from utilization of increased machining  capabilities and successful
sales  and  marketing  efforts.  Sales  from  the  Ultrasonics  segment  totaled
$4,611,000  during FY96, a 6.1% increase over the previous  year's sales totals.
Sales  from the Video  Products  segment  totaled  $2,080,000  for the first two
months of FY96;  after which its operations  ceased to be consolidated  due to a
dilution of ownership  from an offering of its common  stock.  During FY95,  the
activities of the Video Products segment were  consolidated with the Company for
the entire fiscal year and $6,998,000 of sales was recorded.

Investment  and other  income  totaled  $813,000  during  FY96,  primarily  from
$281,000 of rental  income,  $585,000  of gains on  marketable  securities,  and
$469,000 of interest income on excess cash, from a note receivable from DGI, and
from a note receivable which was received as part of the proceeds of the sale of
the  Company's  Dental  segment.  These sources of income were then reduced by a
$525,000  decline  in the value of the  Company's  common  stock  investment  in
Phoenix  Shannon.  During FY95,  investment and other income totaled  $3,443,000
primarily  from  gains  totaling  $3,223,000  from the  sales  of the  Company's
investments  in two  cellular  telephone  partnerships  and  $212,000  of rental
income.

Cost of Sales
Cost of sales  totaled  $15,398,000  in FY96,  a decline  of 11.5% from the FY95
level. Cost of sales represented 66.3% and 68.4% of net sales for FY96 and FY95,
respectively.  The 2.1%  increase in gross margin rates  resulted  from improved
absorption of fixed manufacturing costs within the Electronics  segment, and the
reduction of direct manufacturing costs from improved manufacturing efficiencies
in the Ultrasonics segment resulting from refocused marketing strategies.

Selling, General and Administrative Expenses
Selling, general and administrative expenses of $9,166,000 during FY96 were 2.6%
lower  than the  $9,413,000  reported  for FY95.  The  absence  of ten months of
operating  expenses  from the Video  Products  segment  resulted in a $2,453,000
decrease,  but was  nearly  offset by  $950,000  of legal and  settlement  costs
relating to a lawsuit filed by Althin Medical, Inc. against the Company's former
subsidiary,  Seratronics,  Inc.  and a  $1,000,000  writedown  of the  Company's
investment in DGI. Selling general and administrative  expenses totaled 38.1% of
revenue in FY96, versus 32.6% in FY95.

Research and Development Expenses
Research  and  development   expenses  decreased  from  $2,587,000  in  FY95  to
$1,683,000 in FY96 due primarily to a $978,000  decrease relative to the absence
of the Video Products segment for the last ten months of FY96.
<PAGE>
Interest Expense
Interest expense totaled  $1,237,000 during FY96, which is a 14.5% decrease from
the $1,447,000 of interest  expense  incurred  during FY95. The repayment of the
revolving  line of credit at the end of the third  quarter  of FY96,  concurrent
with the sale of the net assets of the Dental segment, and principal payments on
long-term indebtedness resulted in the lower interest cost.

Income Tax Benefit
For FY1996,  the income tax  benefit  attributable  to the loss from  continuing
operations totaled $1,166,000, or an effective tax benefit rate of 33.9%, versus
a tax benefit of $812,000, or a rate of 41.2% in FY95.

Discontinued Operations
During FY96,  the Company sold the net assets of the Dental segment and recorded
a net gain of $3,790,000,  or $1.96 per share,  including a curtailment  gain of
$519,000  related to the overfunded  defined  benefit  retirement  plan. For the
nine-month  period in FY96 prior to the sale, these  operations  earned $413,000
net of tax,  or $0.21 per share,  versus net  income of  $792,000,  or $0.41 per
share,  for FY95.  Such  results  were  based  upon  historical  allocations  of
administrative expenses, and net of apportioned income taxes.

Preferred Dividends
The preferred dividend  requirement,  including the amortization of the issuance
discount,  totaled  $559,000 in FY96,  versus $587,000 for FY95. The decrease is
primarily  related to the fourth  quarter FY96 purchase of 299,561 shares of the
redeemable preferred stock.

As a result of this  purchase,  $1,015,000  of  previously  accrued  but  unpaid
dividends and accreted  discounts were reversed and added to income  application
to common shares.  An additional  $1,324,000 was recorded to additional  paid-in
capital as a result of the price paid being below the original issue price.

Net Income (Loss)
For FY96, the Company reported net loss from continuing operations in the amount
of $2,270,000.  After the impact of the preferred  dividend  requirement and the
reversal of previously accrued preferred dividends, the net loss from continuing
operations applicable to common shareholders was $1,814,000, or $0.94 per share.
In addition, the operations of the discontinued Dental segment and the gain from
its sale produced total income of $4,203,000, or $2.17 per share, to produce net
income applicable to common shares of $2,389,000,or $1.23 per share for FY96.

For FY95, the net loss from continuing  operations totaled $1,159,000.  After an
extraordinary  loss of  $21,000  from  the  early  extinguishment  of  debt  and
preferred  dividends,  the net loss from  continuing  operations  applicable  to
common  shareholders  was $1,767,000,  or $0.91 per share. The operations of the
discontinued  Dental segment produced net income of $792,000 or $0.41 per share,
bringing the loss attributable to common shares to $975,000,  or $0.50 per share
for FY95.


<PAGE>



LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1997, the Company's cash, short-term  investments and marketable
securities  totaled  $8,564,000,  which  is an  increase  of  $639,000  from the
February 29, 1996 total of $7,925,000.  The marketable  securities are comprised
of the common stock of certain financial institutions and of Centennial Cellular
Corporation,  non-investment  grade high-yield bonds and short-term  instruments
being held in escrow until  November 1997 pursuant to the sale of the net assets
of the Dental segment.

During FY97, The J. M. Ney Company, the Company's primary operating  subsidiary,
closed on a $6,000,000  Revolving  Credit and Deferred  Payment Sales  Agreement
with two banks under which it can borrow funds or acquire  precious  metals on a
deferred payment basis.  This revolving credit  agreement  contains  restrictive
covenants  including  those that limit the  transfer of cash or other  resources
from Ney to the Company.  The Company  believes that these  limitations will not
restrict it from meeting its  obligations or from  continuing  with its business
plans.

During FY97, the Company secured the consent of a majority of the non-affiliated
holders of its outstanding 10.5% Convertible  Subordinated Debentures and one of
its Senior Lenders,  and reached  agreement with another Senior Lender to permit
the  Company to use up to $6.0  million to  repurchase  shares of the  Company's
Capital  Stock (the  Capital  Stock  Purchase  Program).  The first phase of the
Capital Stock  Purchase  Program  resulted in the repurchase of 24,283 shares of
the Company's Series A Cumulative Convertible Preferred Stock.

Subsequent  to  February  28,  1997,  DGI  entered  into  an  agreement  to sell
substantially all of its assets. Accordingly, the Company expects to realize the
value of this investment during the first half of FY98.

At February  28, 1997,  the  Company's  net worth  totaled  $13,647,000  
or $7.05 per share,  which is  essentially unchanged from the prior year's 
equity position.

The  Indenture   relating  to  the  Company's  10.5%  Convertible   Subordinated
Debentures  contains a covenant  restricting  the  payment of  dividends,  on or
repurchases or  redemptions  of, the Company's  capital stock.  As the result of
preferred stock  repurchases and losses incurred in recent years, the Company is
currently  prohibited by such covenant  (except as provided by the Capital Stock
Purchase Program) from making such payments on the Preferred Stock or the Common
Stock until such time as the sum of (i) the  aggregate  cumulative  consolidated
net income;  (ii) the aggregate  net cash proceeds  received by the Company from
sales of shares of its capital stock for cash;  and (iii) the aggregate net cash
proceeds  received by the Company from the sales of  indebtedness of the Company
convertible  into  stock of the  Company,  to the  extent  such  stock  has been
converted  into stock of the  Company  (collectively,  Consolidated  Net Income)
exceeds the sum of the aggregate  amount of all dividends  declared and all such
other payments and distributions on account of the purchase, redemption or other
retirement of any shares of stock of the Company (collectively,  Distributions).
As of February  28,  1997,  Distributions  exceeded  Consolidated  Net Income by
approximately $4,282,000.

The Company  believes that funds  generated  from  operations,  sale of existing
investments or businesses,  and potential future refinancings will be sufficient
to meet its anticipated  working capital and debt service  requirements  for the
foreseeable  future,  but there can be no  assurance as to the  availability  of
future financing or the terms thereof.

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.  These  uncertainties  include,  but are not limited  to,  general
economic  conditions,  competitive  conditions in markets served by the Company,
political  developments  in countries  where the Company  conducts  business and
market conditions for precious metals and equity securities.


<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, 1997 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, 1997  contained in this Item
(amounts in thousands, except per share data).

Selected Quarterly Financial Data
<TABLE>
<CAPTION>
          1997 Quarterly Financial Data                  May 31           August 31        November 30          February 28
--------------------------------------------------- ------------------ ---------------- ------------------- --------------------
<S>                                                    <C>              <C>                <C>                  <C>               
Net sales and revenues                                 $8,050           $5,542             $4,801               $5,982
Gross profit                                            2,733            2,008              2,060                2,247
Net income (loss)                                         619             (374)              (941)                 995
Income (loss) applicable to common shares                 477             (474)            (1,027)               1,046
--------------------------------------------------- ------------------ ---------------- ------------------- --------------------
Earnings (Loss) Per Common Share:
Net income (loss)                                       0.25             (0.25)             (0.53)               0.54
Share Price:
High                                                    6 1/2              7                   7                   6 1/2
Low                                                     3 3/4              5 1/4               3 1/4               5
--------------------------------------------------- ------------------ ---------------- ------------------- --------------------

          1996 Quarterly Financial Data                  May 31           August 31        November 30          February 29
--------------------------------------------------- ------------------ ---------------- ------------------- --------------------
Net sales and revenues1                                $7,199            $5,835             $5,516              $5,498
Gross profit                                            2,269             1,798              1,968               1,802
Loss from continuing operations                          (319)             (278)              (333)             (1,340)
Net income (loss)                                        (220)               (8)             3,451              (1,290)
                                                                             
Income (loss) applicable to common shares                (367)             (157)             3,304                (391)
--------------------------------------------------- ------------------ ---------------- ------------------- --------------------
Earnings (Loss) Per Common Share:
Continuing operations                                    (.24)            (.22)              (.25)                (.23)
Net income (loss)                                        (.19)            (.08)             1.71                  (.21)
Share price:
High                                                      6 1/4           6 1/4               5 1/4               6 1/2
Low                                                       3               4 3/4               3                   3 3/4
--------------------------------------------------- ------------------ ---------------- ------------------- --------------------
</TABLE>
1 The results of Digital GraphiX are included for the first two months of 1996 
only.  Net sales and revenues,  and income (loss) from  continuing  operations 
for FY 1996 exclude the results of  operations  of the  Company's  Dental  
segment as a result of its sale in November 1995.


<PAGE>


ANDERSEN GROUP, INC.
Consolidated  Balance  Sheets  February  28,  1997  and  February  29,  1996 (in
thousands, except share data)
                                          
<TABLE>        
<S>                                                                               <C>                        <C>                    
Assets                                                                             1997                       1996                
Current assets:
Cash and cash equivalents                                                         $3,219                     $4,116
Marketable securities                                                              5,345                      3,809
Accounts and other receivables, less allowance for doubtful
accounts of $190 in 1997 and $124 in 1996                                          2,773                      4,337
Inventories                                                                        9,040                      8,612
Prepaid expenses and other assets                                                    516                         92
------------------------------------------------------------------------- ------------------------ ----------------
Total current assets                                                               20,893                    20,966
------------------------------------------------------------------------- ------------------------ ----------------
Property, plant and equipment, net                                                  9,336                     9,116
Prepaid pension expense                                                             4,274                     4,027
Investment in Digital GraphiX                                                       1,346                     1,259
Other assets                                                                        1,828                     3,430
------------------------------------------------------------------------- ------------------------ ----------------
                                                                                  $37,677                   $38,798
------------------------------------------------------------------------- ------------------------ -----------------
Liabilities, Redeemable Convertible Preferred Stock and Common and
Other Stockholders' Equity
Current liabilities:
Current maturities of long-term debt                                              $  773                     $1,136
Short-term debt                                                                    2,305
                                                                                                             -
Accounts payable                                                                   1,398                      2,923
Accrued liabilities                                                                3,670                      4,578
Deferred income taxes                                                                564                        567
------------------------------------------------------------------------- ------------------------ -----------------
Total current liabilities                                                          8,710                      9,204
------------------------------------------------------------------------- ------------------------ -----------------
Long-term debt, less current maturities                                            7,041                      7,349
Other long-term obligations                                                        1,121                      1,143
Deferred income taxes                                                              2,267                      2,197
Commitments and contingencies (Notes 7 and 15)
Redeemable cumulative convertible preferred
     stock, no par value; authorized 800,000 shares;
     issued 789,628 shares; outstanding shares 265,192 in 1997
     and 289,475 in 1996; unamortized discount of $81 in 1997
     and $148 in 1996; liquidation preference $18.75 per share                     4,891                      5,280
------------------------------------------------------------------------- ------------------------ -----------------
Common and other stockholders' equity: Preferred stock, no par value; authorized
200,000 shares Common stock, no par value; authorized 6,000,000 shares,
     issued 1,958,478 shares in 1997 and 1,958,205 shares in 1996                  2,103                      2,103
Additional paid-in capital                                                         3,248                      3,248
Retained earnings                                                                  8,386                      8,364
------------------------------------------------------------------------- ------------------------ -------------------------
                                                                                  13,737                     13,715
Treasury stock, at cost, 24,000 shares                                               (90)                       (90)
------------------------------------------------------------------------- ------------------------ -------------------------
Total common and other stockholders' equity                                       13,647                     13,625
------------------------------------------------------------------------- ------------------------ -------------------------
                                                                                  $37,677                   $38,798
------------------------------------------------------------------------- ------------------------ -------------------------
</TABLE>
See accompanying notes to consolidated financial statements.


<PAGE>


ANDERSEN GROUP, INC.
Consolidated Statements of Operations
Years ended February 28, 1997,
February 29, 1996 and February 28, 1995
(in thousands, except per share data)
<TABLE>
                                                                1997                  1996                    1995

------------------------------------------------------- --------------------- ---------------------- -----------------------
<S>                                                         <C>                    <C>                     <C>          
Revenues:
Net sales                                                   $ 24,517               $23,235                 $ 25,423
Investment and other income (loss)                             (142)                   813                    3,443
------------------------------------------------------- --------------------- --------------------- ------------------------
                                                              24,375                24,048                   28,866
------------------------------------------------------- --------------------- ---------------------- -----------------------
Costs and expenses:
Cost of sales                                                 15,469                15,398                   17,390
Selling, general and administrative                            7,249                 9,166                    9,413
Research and development                                       1,472                 1,683                    2,587
Interest expense                                                 790                 1,237                    1,447
------------------------------------------------------- --------------------- ---------------------- -----------------------
                                                              24,980                27,484                   30,837
------------------------------------------------------- --------------------- ---------------------- -----------------------
Loss from continuing operations
  Before income taxes and extraordinary item                    (605)              (3,436)                   (1,971)
Income tax benefit                                               904                1,166                       812
------------------------------------------------------- --------------------- ---------------------- -----------------------
Income (loss) from continuing operations
  Before extraordinary item                                      299               (2,270)                   (1,159)
Income from discontinued operations, net of
income tax of $170 and $528,in
1996 and 1995, respectively                                       -                   413
                                                                                                                792
Gain on sale of discontinued segment, net of
income taxes of $2,041                                            -                 3,790            -
------------------------------------------------------- --------------------- ---------------------- -----------------------
Income (loss) before extraordinary item                           299               1,933                       (367)
Extraordinary loss from early
extinguishment of debt, net of income tax
benefit of $10                                                    -                   -
                                                                                                                 (21)
------------------------------------------------------- --------------------- ---------------------- -----------------------
Net income (loss)                                                 299               1,933                       (388)
Preferred dividend requirement                                   (411)               (559)                      (587)
Reversal of preferred dividends                                   134               1,015
                                                                                                                 -
------------------------------------------------------- --------------------- ---------------------- -----------------------
Income (loss) applicable to common shares                        $ 22             $ 2,389                     $ (975)
------------------------------------------------------- --------------------- ---------------------- -----------------------
Earnings (loss) per common share:
Continuing operations                                            $.01             $ (.94)                     $ (.90)
Discontinued operations                                           -                  .21                        . 41
Gain on sale of discontinued segment                              -                 1.96
                                                                                                                 -
Extraordinary item                                                -                   -                         (.01)
------------------------------------------------------- --------------------- ---------------------- -----------------------
Income (loss) per common share                                   $.01                $1.23                    $ (.50)
------------------------------------------------------- --------------------- ---------------------- -----------------------
</TABLE>
See accompanying notes to consolidated financial statements.


<PAGE>


ANDERSEN GROUP, INC.
Consolidated Statements of Common and Other Stockholders' Equity
Years ended February 28, 1997,
February 29, 1996 and  February 28, 1995
(in thousands, except share data)
<TABLE>
                                 Common           Common          Additional
                                 Stock             Stock           Paid-In          Retained        Treasury
                                 Shares           Amount           Capital          Earnings         Stock            Total
--------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
<S>                            <C>                <C>                <C>               <C>               <C>             <C>
Balance, February 28, 1994     1,952,798          $2,103             $1,873            $6,950            $(90)           $ 10,836
Preferred stock dividends
     and accretion                  -                -                -                  (587)             -                 (587)
Conversion of preferred            5,407                                 51               -                -                   51
     stock                                           -
Net loss                            -                -                 -                 (388)             -                 (388)
--------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
Balance, February 28, 1995     1,958,205           2,103              1,924             5,975              (90)             9,912
Preferred stock dividends
     and accretion                  -                 -                -                 (559)             -                 (559)
Gain on redemption
     of                             -                 -               1,324             1,015              -                2,339
     redeemable preferred stock
Net income                          -                 -                -                1,933              -                1,933
--------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
Balance, February 29, 1996     1,958,205             2,103            3,248             8,364              (90)            13,625
Shares from prior
conversion of                        273              -                -                  -                -               -
preferred stock
Preferred stock dividends
     and accretion                  -                 -                -                 (411)             -                 (411)
Gain on redemption of               -
     Redeemable preferred                             -                -                  134              -                  134
     stock
Net income                          -                 -                -                  299              -                  299
--------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
Balance, February 28, 1997     1,958,478            $2,103            $3,248           $8,386             $(90)           $13,647
--------------------------- ----------------- ---------------- ----------------- --------------- --------------- -----------------
</TABLE>
See accompanying notes to consolidated financial statements.



<PAGE>



ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
Years ended February 28, 1997,
February 29, 1996 and February 28, 1995
(in thousands)
<TABLE>
                                                                1997          1996            1995
----------------------------------------------------------- ------------- -------------- ---------------
<S>                                                              <C>         <C>             <C>              
Cash flows from operating activities:
Net income (loss)                                                $299        $1,933          $(388)
Adjustments  to  reconcile  net  income  (loss) to net cash
  used for  operating activities:
Depreciation, amortization and accretion                        1,419         1,887          2,329
Deferred income taxes                                              67          (479)          (414)
Gain on sale of Dental segment                                   -           (3,790)           -
Gain on sale of cellular investments                             -              -           (3,223)
Losses (gains) from securities                                  1,149           (46)          (186)
Purchases of securities                                        (1,625)       (3,576)        (3,031)
Proceeds from sales of securities                                 526         1,893          2,213
Loss on redemptions of long-term debt                            -              -               31
Pension (income) expense                                         (247)            8           (148)
Loss (gain) on disposal of property, plant and equipment           58             1            (62)
Investment in Digital GraphiX                                     (87)          543          2,014
Changes in operating assets and liabilities,  net of 
changes from sale of Dental segment in 1996:
Accounts and notes receivable                                    1,564       (1,205)          (645)
Inventories                                                       (428)      (2,941)        (1,096)
Prepaid expenses and other assets                                 (339)        (806)           667
Accounts payable                                                (1,799)       2,006           (144)
Accrued liabilities and other long-term obligations               (930)      (2,022)           398
----------------------------------------------------------- ------------- -------------- ---------------
  Net cash used for operating activities                          (373)      (6,594)        (1,685)
----------------------------------------------------------- ------------- -------------- ---------------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment                 4           256            337
Purchase of property, plant and equipment                       (1,191)      (1,503)        (1,436)
Proceeds from sale of Dental segment, net of cash sold           -           16,848            -
Proceeds from sale of cellular partnerships                      -              -            7,511
----------------------------------------------------------- ------------- -------------- ---------------
  Net cash (used for) provided by investing activities          (1,187)      15,601          6,412
----------------------------------------------------------- ------------- -------------- ---------------
Cash flows from financing activities:
Principal payments on long-term debt                            (1,250)        (642)        (4,042)
Redemptions of preferred stock                                    (392)      (3,758)           -
Proceeds (payment) of short-term debt, net                       2,305       (3,200)           (37)
----------------------------------------------------------- ------------- -------------- ---------------
 Net cash provided by (used for) financing activities              663       (7,600)        (4,079)
----------------------------------------------------------- ------------- -------------- ---------------
 Net (decrease) increase in cash and cash equivalents             (897)       1,407            648
 Cash and cash equivalents, beginning of year                    4,116        2,709          2,061
----------------------------------------------------------- ------------- -------------- ---------------
 Cash and cash equivalents, end of year                         $3,219       $4,116          $2,709
----------------------------------------------------------- ------------- -------------- ---------------
Supplemental disclosure of cash flow information:
Cash paid for:
 Interest                                                       $ 863        $1,203          $1,503
 Income taxes, net                                              $  85        $1,410          $  166
----------------------------------------------------------- ------------- -------------- ---------------
</TABLE>
See accompanying notes to consolidated financial statements.


<PAGE>


Notes to Consolidated Financial Statements
Years ended February 28, 1997, February 29,
1996 and February 28, 1995

(1)    Nature of Business

Andersen  Group,  Inc.  (the  Company) is a  diversified  holding  company.  Its
subsidiaries  manufacture electronic  connectors,  components and precious metal
materials  and  industrial  ultrasonic  cleaners  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.  As a
result  of the  partial  spin-off  of  Digital  GraphiX,  Incorporated  (DGI) as
described  in  Note  17,  the  consolidated  financial  statements  include  the
operating  results of DGI through May 2, 1995.  As of both February 28, 1997 and
February  29,  1996,  DGI's  balance  sheet  has  not  been  consolidated.   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).  Any  changes in the  valuation  of the  portfolio  are
reflected in the accompanying Consolidated Statements of Operations. At February
28, 1997,  marketable  securities  consisted of $3,771,000 of equity investments
and  $1,574,000  of debt  securities,  while at February  29,  1996,  marketable
securities  comprised  $3,063,000  of equity  investments  and  $746,000 of debt
securities.  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



<PAGE>



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 in accordance
with the provisions set forth in SFAS No. 109, Accounting for Income Taxes. 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

Earnings per share is computed  based on the weighted  average  number of common
and common  equivalent shares  outstanding.  Fully diluted net income (loss) per
share assumes full conversion of all convertible securities into common stock at
the later of the beginning of the year or date of issuance, unless antidilutive.
For the years ended February 28, 1997,  February 29, 1996 and February  28,1995,
the effects have been antidilutive.

Off-Balance Sheet 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.

Financial Statement Presentation

Certain  reclassifications  have been made to the 1996 and 1995  financial  
statements in order to conform with the 1997 presentation.

(3)    Inventories

Inventories consist of the following (in thousands):
<TABLE>
                                                           February 28, 1997          February 29, 1996
             ----------------------------------------- -------------------------- --------------------------
             <S>                                                 <C>                      <C>
             Raw Material                                        $3,111                   $3,147                                   
             Work in Process                                      3,877                    3,413
             Finished Goods                                       2,955                    3,398
             ----------------------------------------- -------------------------- --------------------------
                                                                  9,943                    9,958
             LIFO Reserve                                           903                    1,346                       
             ----------------------------------------- -------------------------- --------------------------
                                                                 $9,040                   $8,612
             ----------------------------------------- -------------------------- --------------------------
</TABLE>  
At February  28,  1997 and  February  29,  1996,  inventories  valued at LIFO 
cost  comprised  64% and 56% of total inventories, respectively.

(4)    Sale of 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;  a
two-year,  interest-bearing  note  for $1  million  and  additional  conditional
consideration subject to the determination of defined contingencies. 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 the year ended  February 28, 1997,  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.


<PAGE>



The assets and liabilities sold are presented below (in thousands):
<TABLE>
                 <S>                                                                       <C>    
                 Cash                                                                      $     552
                 Accounts receivable                                                           5,476
                 Inventories                                                                   7,019
                 Other current assets                                                            415
                 Property, plant and equipment, net                                            1,752
                 Other assets                                                                     21
                 ------------------------------------------------- ----------------------------------
                 Total assets                                                                 15,235
                 ------------------------------------------------- ----------------------------------
                 Accounts payable                                                              1,203
                 Other current liabilities                                                       259
                 ------------------------------------------------- ----------------------------------
                 Total liabilities                                                             1,462
                 ------------------------------------------------- ----------------------------------
                 Net assets sold                                                             $13,773
                 ------------------------------------------------- ----------------------------------
</TABLE>
The  results  of  operations  of the  Dental  segment  have  been  presented  as
discontinued  operations.  Revenue from this segment totaled approximately $29.6
million, and $38.0 million during 1996 and 1995, respectively.

(5)    Sale of Cellular Partnership Interests

In May 1994, the Company's  subsidiary,  Clear Cellular Holdings,  Inc. (Clear),
sold its interest in a partnership which owned a cellular communications license
to Centennial  Cellular  Corporation  (Centennial) for a combination of cash and
Centennial  stock.  The Centennial  stock was immediately  remarketed in an open
market block  transaction.  Overall,  Clear received  $3,472,000 in net proceeds
from the partnership interest sale.

In August 1994,  the Company sold its general  partnership  interest in MidSouth
Cellular  L.P., a nonwireline  cellular  telephone  franchise,  to Centennial in
exchange for 281,507  shares of Centennial  stock,  of which 241,395 shares were
sold at average  proceeds  of $16.67 per share.  The Company  continues  to hold
23,086 shares of Centennial common stock.

During the years ended 1996 and 1995, the Company  recorded gains from the sales
of  these  cellular  partnership  interests  totaling  $65,000  and  $3,223,000,
respectively, which are included in investment and other income.

(6)    Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands):
<TABLE>
                                                             February 28, 1997              February 29, 1996
------------------------------------------------------ ------------------------------ ------------------------------
<S>                                                               <C>                            <C>   
Land and improvements                                             $ 1,054                        $1,054
Buildings and improvements                                          8,783                         8,610
Machinery and equipment                                             10,188                        9,287
Furniture and fixtures                                                 921                          907
------------------------------------------------------ ------------------------------ -------------------------------
                                                                    20,946                        19,858
Less accumulated depreciation and amortization                      11,610                        10,742
------------------------------------------------------ ------------------------------ -------------------------------
                                                                  $  9,336                       $ 9,116
------------------------------------------------------ ------------------------------ -------------------------------
</TABLE>
Depreciation  and  amortization  expense  was  $1,393,000,  $1,797,000  and 
$1,977,000  in 1997,  1996  and  1995, respectively.

At February  28, 1997 and  February  29,  1996,  property,  plant and  equipment
includes  $1,146,000  and  $567,000,  respectively  of machinery  and  equipment
acquired  under  capital  leases,  which  expire  through the fiscal year ending
February 28, 2002,  with a related  allowance for  depreciation  of $493,000 and
$439,000, respectively.


<PAGE>



(7)    Short-term Debt

The Company's  primary operating  subsidiary,  The J.M. Ney Company (Ney), has a
$6.0 million demand  revolving  credit and deferred payment sales agreement with
two  commercial  banks.  At February 28, 1997,  $2,305,000 was  outstanding  and
$500,000  was  committed  through a standby  letter of credit.  The  facility is
secured by substantially all of Ney's assets.  At Ney's discretion,  interest is
charged at the bank's prime rate,  which was 8.25% at February  28, 1997,  or at
LIBOR plus 2.50% if borrowing  is fixed for a period time,  or at 2.50% 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 Ney to the  Company and
which require Ney to maintain a specified  amount of  Stockholders'  equity.  At
February  28,  1997  the  amount  of  assets  which  Ney  was  restricted   from
distributing to the Company totaled approximately $11,655,000.

(8)   Accrued Liabilities
<TABLE>
Accrued liabilities consist of the following (in thousands):

                                                 February 28, 1997                      February 29, 1996
--------------------------------------- ------------------------------------ ----------------------------------------
<S>                                                    <C>                                  <C>
Employee compensation                                  $ 628                                  $594
Accrued dividends                                        934                                   660
Income taxes                                              51                                   849
Other                                                  2,057                                 2,475
--------------------------------------- ------------------------------------ ----------------------------------------
                                                      $3,670                                $4,578
--------------------------------------- ------------------------------------ ----------------------------------------
</TABLE>
(9)    Redeemable Cumulative Convertible Preferred Stock

During  1997  and  1996,  the  Company  purchased  24,283  and  299,561  shares,
respectively,   of  its  redeemable   cumulative   convertible  preferred  stock
(Preferred  Stock) at $16.15 per share in 1997, and at $12.25 per share in 1996.
The 1997  purchases were part of a repurchase  program,  while in 1996 purchases
were made under terms of a voluntary tender offer. As a result of the purchases,
the Company reversed $134,000 and $1,015,000 in 1997 and 1996, respectively,  of
accrued dividends and accreted discounts.  In addition,  in 1996,  $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.

The  Preferred  Stock is subject to annual  mandatory  redemption  from  legally
available funds of 160,000 shares at $18.75 per share, or $3,000,000, commencing
in March  1996.  Purchases  of  Preferred  Stock  to date  have  satisfied  this
requirement through February 1999.

Quarterly  dividend  payments,  ranging  from  $.1875 to $.4375 per  share,  are
accrued based upon the operating income of Ney, as defined. Approximately $1.24,
$.78 and $.75 per preferred  share of dividends were accrued  during 1997,  1996
and 1995, respectively. As discussed in Note 10, the Company has been restricted
from paying  dividends since April 15, 1993 until  cumulative  consolidated  net
income (as  defined)  earned  after  February  28,  1997  exceeds  approximately
$4,282,000.  At February  28, 1997 and February 29, 1996 the Company had accrued
$934,000 and $660,000, respectively, for payment of prior dividends.

The preferred shares increase in carrying value at a rate of approximately  $.26
per share per year and, as such,  approximately $58,000,  $137,500, and $150,000
of accretion has been recorded as part of the preferred dividend requirement for
1997, 1996 and 1995, 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. The original
conversion  rate of 1.875 has been increased to 1.935 after giving effect to the
issuance of common stock in fiscal 1994. At February 28, 1997, 513,147 shares of
common stock have been reserved for conversion.


<PAGE>



(10)   Long-term Debt
<TABLE>
Long-term debt consists of the following (in thousands):
      
                                                                       February 28, 1997          February 29, 1996
                                                                     ----------------------     ----------------------
<S>                                                                        <C>                     <C>                       
Mortgage note  payable due June 2001;  interest at varying                                         
   rates from 60-68% of the prime rate, as defined, 5.4% 
   at both February 28, 1997 and February 29, 1996, 
   respectively, payable semi-annually; semi-annual
   principal payments in escalating amounts from $59 
   in 1997 to $78 at maturity; secured further by
   certain personal property                                                 $575                      $ 928
Mortgage note payable; interest at 7.75%                                       -                         599
Convertible subordinated debentures, due October 2002;
   Interest at 10.5%, payable semi-annually; annual principal
   payments in varying amounts through maturity; unsecured                  6,287                      6,505
Other                                                                         952                        453
                                                                     ----------------------     ----------------------
                                                                            7,814                      8,485
Less current maturities                                                       773                      1,136
                                                                     ----------------------     ----------------------
                                                                            $7,041                    $7,349
                                                                     ----------------------     ----------------------

</TABLE>
The  terms  of the  convertible  subordinated  debentures  call  for the  annual
redemption  of $834,000  face value of  debentures,  either  through open market
purchases  or  mandatory  sinking  fund  payments.  The Company may also make an
additional  optional  sinking  fund  payment of  $834,000.  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, 1997,  388,806 shares of common stock were
reserved for conversion.

Certain of the debt agreements contain restrictive  covenants which limit, among
other things, mergers or consolidations,  sales of assets,  additional long-term
debt, payments of dividends and stock repurchases.  Under the terms of the 10.5%
Convertible  Subordinated  Debentures,  the  Company  had been  restricted  from
repurchasing  stock or paying  dividends since April 15, 1993 until such time as
the Company's cumulative earnings, as defined,  reach specified amounts.  During
1997,  the  Company  obtained  the consent of a majority of the holders of these
debentures to repurchase up to $6,000,000 of its capital stock.

Maturities  of  long-term  debt for  each of the  next  five  fiscal  years  and
thereafter are as follows (in thousands):
<TABLE>
                                 <C>                                 <S>                             
                                  1998                               $ 773
                                  1999                                1,130
                                  2000                                1,112
                                  2001                                1,097
                                  2002                                  996
                               Thereafter                             2,706
                                                        ---------------------------------
                                                                     $7,814
                                                        ---------------------------------
</TABLE>
(11)   Income Taxes

For 1997, 1996 and 1995, income tax benefit (expense)  consists of the following
(in thousands):
<TABLE>
                                                            1997                  1996                  1995
                                                    --------------------- --------------------- ---------------------
<S>                                                         <C>                  <C>                   <C>  
Current:
   Federal                                                  $410                 $(360)                $ (20)
   State                                                     561                 (296)                  (100)
Deferred                                                     (67)                (389)                   414
                                                    --------------------- --------------------- ---------------------
                                                            $904               $(1,045)                 $294
                                                    --------------------- --------------------- ---------------------
</TABLE>

<PAGE>



The  difference  between the actual income tax benefit  (expense) and the income
tax benefit (expense) computed by applying the statutory Federal income tax rate
of 34% to income  (loss)  before  taxes is  attributable  to the  following  (in
thousands):
<TABLE>
                                                           1997                   1996                  1995
                                                   ---------------------- --------------------- ---------------------
<S>                                                        <C>                  <C>                     <C> 
Income tax benefit (expense)                               $206                  ($1,012)               $199
State income taxes, net of Federal benefit                 (107)                    (196)                (66)
Change in enacted tax rates                                 264                      -                    -
Change in valuation allowance                                -                       483                  -
Adjustment of accrual for prior years' taxes                546                     (319)                161
Other                                                        (5)                      (1)                 -
-------------------------------------------------- ---------------------- --------------------- ---------------------
                                                           $904                  $(1,045)               $294
-------------------------------------------------- ---------------------- --------------------- ---------------------
</TABLE>
During 1997, the Company  settled a State income tax audit covering 1989 through
1996. This settlement is the primary reason for the $546,000 benefit  adjustment
of accrual for prior years' taxes reported in the above reconciliation.

A deferred income tax (expense)  benefit  results from temporary  differences in
the  recognition  of income and expense for income tax and  financial  reporting
purposes.  The principal  components  of the net deferred tax asset  (liability)
which give rise to this deferred income tax (expense) benefit as of February 28,
1997 and February 29, 1996 are as follows (in thousands):
<TABLE>
                                                                          1997                       1996
                                                                -------------------------- --------------------------
<S>                                                                     <C>                        <C>                  
Deferred tax liabilities:
Fixed asset basis differences                                           $(1,288)                   $ (1,580)
Inventory                                                                (1,443)                     (1,476)
Pension                                                                  (1,581)                     (1,491)
Installment sale                                                           (207)                        -
--------------------------------------------------------------- -------------------------- --------------------------
Total deferred tax liabilities                                           (4,519)                     (4,547)
--------------------------------------------------------------- -------------------------- --------------------------
Deferred tax assets:
Post-retirement benefits other than pensions                                 415                        337
Unrealized gains/losses on marketable securities, net                        177                        132
Allowance for uncollectable receivables                                      440                         50
Federal credit carryforwards                                                 302                        753
Other                                                                        354                        511
--------------------------------------------------------------- -------------------------- --------------------------
Total deferred tax assets                                                  1,688                      1,783
--------------------------------------------------------------- -------------------------- --------------------------
Net deferred tax liabilities                                            $(2,831)                    $(2,764)
--------------------------------------------------------------- -------------------------- --------------------------
</TABLE>
At  February  28,  1997 the  Company  had no  valuation  allowance.  The Company
reasonably  expects 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, 1997 the Company had $302,000 of Federal
credit  carryforwards,  $55,000 of which were  attributable  to the  alternative
minimum  tax and  have no  expiration  date.  The  remaining  credits,  totaling
$247,000, expire from 1999 through 2002.

(12)   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 1997, a stock option plan was
put into effect under which  options to acquire  shares of The J. M. Ney Company
were granted. The per share weighted average fair value of stock options granted
in 1997 under the  Company and 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%.

The  Company  has  adopted  the  disclosure  only  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 Ney plan, been determined  based on
the fair 
<PAGE>
value on the grant  date for awards  during  1997  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>
                                                                                      1997
                                                            ---------------------------------------------------------
<C>                                                                                  <S>                                
Net income (loss) applicable to common shares:
   As reported:                                                                       $ 22
   Pro forma                                                                          $(68)
Earnings (loss) per share:
  As reported                                                                         $ .01
  Pro forma                                                                          $(.03)

</TABLE>
The  assumption  regarding  the stock  options  issued during 1997 was that such
options vest over periods  ranging from one to three years.  Proforma net income
reflects only options granted in 1997. 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 1997
is not considered.

The Company  reserved  162,200  shares of common stock for the exercise of stock
options.  At February 28, 1997,  the Company had 60,500  options  available  for
issuance  under the plan.  The J. M. Ney Company has reserved  150,000 shares of
its common stock for the exercise of stock  options.  At February 28, 1997,  Ney
had 20,000 options available for issuance under its plan.

Activity under the Company's plans, including an expired plan, was as follows:
<TABLE>
                                                  Number              Weighted Average              Range of
          Outstanding Options                   of Shares              Exercise Price           Exercise Prices
---------------------------------------- ------------------------- ------------------------ -------------------------
<S>                                             <C>                        <C>                     <C>
Balance at February 28, 1994                      77,600                    $8.39                  $6.00 - $9.50
Canceled                                            (300)                   $7.00                  $7.00
---------------------------------------- ------------------------- ------------------------ -------------------------
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 - $9.375
Granted                                           75,000                    $4.29                  $3.813- $6.125
Canceled                                         (13,000)                   $7.50                  $3.813- $9.375
---------------------------------------- ------------------------- ------------------------ -------------------------
Balance at February 28, 1997                     101,700                    $5.02                  $3.813 - $8.375
---------------------------------------- ------------------------- ------------------------ -------------------------
</TABLE>
At February 28,  1997,  the range of exercise  prices and the  weighted  average
remaining contractual life of the options was as follows:
<TABLE>
                                                        Options Outstanding Options Exercisable
-------------------------------------------------------------------------------------------------------------------

<S>                        <C>           <C>                  <C>                   <C>             <C>
                                                                                                     Weighted
                                                              Weighted Average                        Average
 Range of Exercise         Number        Weighted Average         Remaining             Number       Exercise 
-----------------     ------------------ ------------------    -----------------      -------------- -----------
   $8.375 - $7.75            8,000             $8.22             4.0 years              8,000            $8.22
   $7.00  - $5.375          33,200             $6.46             5.3 years             19,200            $6.90
            $3.813          60,500             $3.81             9.1 years               -                 -
------------------    ------------------ ------------------    -----------------      -------------- -----------
                           101,700
------------------    ------------------ ------------------    -----------------      -------------- -----------
</TABLE>
Also,  during 1997,  options to purchase  130,000  shares of Ney, at an exercise
price of $10.00 per share,  were issued to key  management of Ney. None of these
options was  exercisable  at February 28,  1997,  as they are subject to a three
year vesting  provision.  At February 28,  1997,  the Company  owned all 850,000
shares of Ney. There presently is no public market for Ney's common stock.

(13)   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 
<PAGE>
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>

                                                                    February 28, 1997          February 29, 1996
--------------------------------------------------------------- -------------------------- --------------------------
<S>                                                                      <C>                       <C>                  
Actuarial present value of benefit obligations:
     Vested                                                              $8,970                     $9,092
     Non-vested                                                              68                         63
--------------------------------------------------------------- -------------------------- --------------------------
Accumulated benefit obligation                                            9,038                      9,155
Effect of projected compensation increases                                  983                        907
--------------------------------------------------------------- -------------------------- --------------------------
Projected benefit obligation                                             10,021                     10,062
Plan assets at fair value                                                16,815                     15,642
--------------------------------------------------------------- -------------------------- --------------------------
Plan assets in excess of projected benefit obligation                     6,794                      5,580
Unrecognized prior service cost                                            (141)                     (151)
Unrecognized net gain on plan assets                                     (2,379)                    (1,402)
--------------------------------------------------------------- -------------------------- --------------------------
Prepaid pension expense                                                  $4,274                     $4,027
--------------------------------------------------------------- -------------------------- --------------------------
</TABLE>
For 1997,  1996 and 1995, the projected  benefit  obligations and pension income
were determined using the following components:
<TABLE>
                                                               1997                 1996                1995
                                                        -------------------- ------------------- --------------------
<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                        8.0%                 8.0%                8.5%

</TABLE>
Net pension  expense  (income) for the Company's  funded defined  benefit plan 
for 1997, 1996 and 1995 includes the following components:
<TABLE>
                                                               1997                1996                 1995
                                                        ------------------- -------------------- --------------------
<S>                                                           <C>                  <C>                <C>
Service cost of benefits accrued                             $  253                $ 341                $286
Interest cost on projected benefit obligations                  723                  806                 784
Return on plan assets                                        (2,190)              (2,130)             (1,196)
Unrecognized net gain (loss)                                    967                  991                 (22)
------------------------------------------------------- ------------------- -------------------- --------------------           
Pension (income) expense                                      $(247)                $  8               $(148)
------------------------------------------------------- ------------------- -------------------- --------------------
</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 Ney.  There are no assets held by the plan. At February 28,
1997 and February 29, 1996, 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   $314,400  and  $319,550,
respectively.  For each of the fiscal years 1997, 1996 and 1995, a discount rate
of 7.5% was used for determining the projected benefit obligation.

Pension  expense for all defined  contribution  plans  totaled  $121,000,  
$143,000 and $157,000 in 1997,  1996 and 1995, respectively.


<PAGE>


(14)   Post-Retirement Benefit Obligations

During 1993,  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 1997,
1996 and 1995 was  approximately  $53,000,  $55,000 and  $56,000,  respectively,
including interest.  At February 28, 1997 and February 29, 1996, the accumulated
benefit obligation for post-retirement  benefits was approximately  $823,000 and
$843,000,  respectively.  At  February  28,  1997,  32 retirees  were  receiving
benefits under this plan.

The  accumulated  estimated  benefit  obligation was  determined  using the unit
credit method and assumed  discount rates of 7.25% at both February 28, 1997 and
February 29, 1996, respectively. At February 28, 1997 and February 29, 1996, the
accumulated benefit obligation was compiled using assumed health care cost trend
rates of 9.0% and 10%, 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, 1997 of a 1%  increase  each year in the health care cost trend rate
used would  result in an  estimated  increase  of  approximately  $63,000 in the
obligation.

(15)   Leases

During 1997, 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 1997  Consolidated  Statement of Cash Flows.
The Company leases  various  manufacturing  and office  facilities and equipment
under operating lease agreements expiring through January 2004. In addition, the
Company earns rental income from office space leased to tenants under  operating
leases expiring through February 28, 1999. Lease expense was $209,000,  $240,000
and $349,000 for 1997, 1996 and 1995, respectively,  while rental income totaled
$342,000, $281,000 and $212,000 for 1997, 1996 and 1995, 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):
<TABLE>
                                            Lease Expense                 Rental Income
               <S>                            <C>                            <C>
               1998                           $ 162                          $276
               1999                             152                           132
               2000                             115                            -
               2001                              38                            -
               2002                              38                            -
               Thereafter                        23                            -
               ------------------ ------------------------------ ------------------------------
</TABLE>


<PAGE>



(16)   Business Segments and Export Sales

During 1997,  the Company  operated in two business  segments:  Electronics  and
Ultrasonics.  Operating  income  consists  of net sales,  less cost of sales and
selling,  general and administrative expenses directly allocated to the industry
segments.  Corporate  expenses  consist  of  administrative  costs and  interest
expense.   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 a specific segment.

Summarized  financial  information  for  business  segment  is  as  follows  (in
thousands):
<TABLE>
                                                          1997                  1996                1995

<S>                                                     <C>                   <C>                 <C>           
Net Sales and revenues:
  Electronics                                           $20,643               $16,544             $14,079
  Ultrasonics                                             3,874                 4,611               4,346
  Video Products                                           -                    2,080               6,998
  Corporate                                                (142)                  813               3,443
                                                  --------------------- --------------------- -----------------
                                                         $24,375               $24,048            $28,866
                                                  --------------------- --------------------- -----------------
Operating income (loss):                       
  Electronics                                             $2,598                $1,612             $1,113
  Ultrasonic                                                 (57)                 (563)            (1,287)
  Video Products                                           -                      (177)            (1,876)
  Corporate                                               (3,146)               (4,308)                79
                                                  --------------------- --------------------- -----------------
                                                           $(605)              $(3,436)           $(1,971)
                                                  --------------------- --------------------- -----------------
Identifiable assets:
  Dental                                                   -                     -                $14,789
  Electronics                                            $22,467               $20,886             12,842
  Ultrasonics                                              1,798                 1,911              2,458
  Corporate                                               13,412                16,001             13,590
                                                  --------------------- --------------------- -----------------
                                                         $37,677               $38,798             $43,679
                                                  --------------------- --------------------- -----------------
Depreciation, amortization & accretion:
  Electronics                                             $1,142                $1,363              $1,057
  Ultrasonics                                                 95                    76                  54
  Video Products                                           -                     -                     350
  Corporate                                                  240                   230                 627
                                                  --------------------- --------------------- -----------------
                                                          $1,477                $1,669              $2,088
                                                  --------------------- --------------------- -----------------
Capital expenditures:
  Electronics                                             $1,512                $1,239                $649
  Ultrasonics                                                234                    66                  78
  Video Products                                           -                     -                     507
  Corporate                                                   24                   123                 168
                                                  --------------------- --------------------- -----------------
                                                          $1,770                $1,428              $1,402
------------------------------------------------- --------------------- --------------------- -----------------
</TABLE>
Export sales for 1997, 1996 and 1995 were $3,475,000, $2,658,000 and $2,262,000,
respectively.  Such sales were made  primarily  to  customers  in Europe and the
Pacific Rim.

(17)   Investments

Digital GraphiX, Incorporated

During  May 1995,  DGI issued  additional  shares of common  stock for  $324,000
before transaction costs, thus diluting the Company's ownership to approximately
19%.  The Company did not  recognize  any gain related to this  transaction.  In
January 1995, the Company  converted its  receivable  from DGI to a $2.9 million
note  receivable at 7.5% interest,  which,  when  discounted to reflect a market
rate of interest,  and coupled with a reduction of approximately $500,000 of net
liabilities to DGI, resulted in a carrying value of $1.8 million at February 28,
1995.


<PAGE>



Prior to May 1995, the Company  reduced  intercompany  liabilities and increased
its  investment  in DGI to nearly $2.3  million.  As of February 29,  1996,  the
Company  reduced the carrying  value of its  investment to  approximately  $1.26
million,  and in doing so, formally discharged DGI of its obligation to pay $2.2
million.  With this  forgiveness of debt, the Company has realized an income tax
benefit in 1996.

During  1997,  the  Company  converted  $1,047,000  of the debt  portion of this
investment  into  an  equal  amount  of  DGI's   convertible   preferred  stock.
Additionally,  the Company invested  $250,000 to purchase 83,334 shares of DGI's
common  stock to bring its  total  common  stock  investment  in DGI to  235,334
shares.  Subsequent to February 28, 1997, DGI sold substantially all its assets,
which will enable it to repay its notes and redeem its preferred  stock.  Future
liquidations  of  remaining  assets are  expected to allow DGI to pay its common
shareholders approximately $1.00 per share. The Company expects to fully realize
its entire recorded investment as a result of these events.

The Company's Chairman and President are also directors and stockholders of DGI.

Institute for Automated Systems

Included in other assets at February 28, 1997 is an investment of  approximately
$835,000 in a joint  venture  which is investing in the  Institute for Automated
Systems, a Russian  telecommunications  company that has plans to develop a data
transmission network throughout Russia.

The Company's  Chairman and another Director are also among a group of investors
in the joint venture.

(18)   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.  The
fair value of the  investment  in DGI,  which is comprised of notes  receivable,
preferred  stock and common  stock,  is  estimated to  approximate  the carrying
amount  based upon the  announcement  of the sale of certain of DGI's  assets as
described  in Note 17. The note  receivable  and Phoenix  Shannon  common  stock
received in connection with the sale of the Dental segment have been written off
to no value  which  approximates  fair  value  as  estimated,  based on  factors
affecting Phoenix Shannon's ability to repay such note.

At February  28,  1997,  the Company had futures  contracts  to purchase  12,500
ounces of palladium through June 1997 at aggregate prices approximating  market.
The  Company  has not been  subject  to  material  gains or losses  from  theses
contracts as they have generally been offset by the  transactions  being hedged.
Realized  market gains and losses on such contracts are also included in cost of
sales.

The  carrying  value of  short-term  debt equals  fair value as it reflects  the
market  value of the  corresponding  precious  metals in which the  liability is
denominated.

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.

It is not  practicable  to  estimate a fair value for the  redeemable  preferred
stock due to the terms of this  security,  including  the  cumulative  nature of
dividends,  the right to convert  the  preferred  shares to common  shares,  the
possibility  for  increased  dividends  based upon the  earnings of Ney, and the
right for preferred  stockholders  as a group to elect a  representative  to the
Company's  Board of Directors.  Current  limitations  relating to the payment of
dividends  and the  redemption  of shares  also  factor  into the  inability  to
reasonably estimate a fair value for this security.



<PAGE>


Independent Auditors' Report

KPMG Peat Marwick LLP Letterhead


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

We have audited the accompanying  consolidated balance sheets of Andersen Group,
Inc.  and  subsidiaries  as of February  28, 1997 and  February 29, 1996 and the
related  consolidated  statements of operations,  common and other stockholders'
equity  and cash  flows for each of the  years in the  three-year  period  ended
February  28,   1997.   These   consolidated   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our 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 February 29, 1996, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended February 28, 1997 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.

None.

                                                     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  1997 Proxy  Statement for Annual Meeting of  Shareholders,  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 1997 Proxy Statement for Annual Meeting of Shareholders.

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

The  information  required  by this Item is  incorporated  by  reference  to the
Registrant's 1997 Proxy Statement for Annual Meeting of Shareholders.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The  information  required  by this Item is  incorporated  by  reference  to the
Registrant's 1997 Proxy Statement for Annual Meeting of Shareholders.


<PAGE>



                                                      PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                     REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a)1.     Consolidated Financial Statements applicable to the Registrant 
          contained in Item 8:

          <C>                                                                               <S>
          Consolidated Balance Sheets                                                       Pages
             as of February 28, 1997 and February 29, 1996                                   18
          Consolidated Statements of Operations
             for the years ended February 28, 1997, February 29, 1996 and
             February 28, 1995                                                               19
          Consolidated Statements of Common and Other Stockholders' Equity                          
             for the years ended February 28, 1997, February 29, 1996
             and February 28, 1995                                                           20
          Consolidated Statements of Cash Flows
             for the years ended February 28, 1997, February 29, 1996
             and February 28, 1995                                                           21
          Notes to Consolidated Financial Statements                                      22-32
          Independent Auditor's Report                                                       33

(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:                         

</TABLE>
Exhibit
  No.                Description
                                                    
3.1     Amendedand Restated Certificate of Incorporation of the Registrant,
        incorporated  herein by  reference  to Exhibit  3.1 to the  Registrant's
        Annual  Report  on Form  10-K  for the  year  ended  February  29,  1992
        (Commission File No. 0-1460).

3.2     Amended and Restated By-Laws of the Registrant as of April 18, 1997.*


4.1     Indenture, dated as of October 15, 1982, between the Registrant and 
        Hartford National Bank and Trust Company (predecessor to Fleet National 
        Bank, N.A., The Connecticut  National  Bank and Shawmut  Bank,  N.A.),  
        as  Trustee, in respect of $10,000,000,  aggregate principal amount, 
        10-1/2% Convertible Subordinated  Debentures Due 2002, 
<PAGE>
        incorporated  
        herein by reference to Exhibit  4.8 to the  Registrant's  Registration  
        Statement on Form  S-4
        (Commission File No. 33-38646) effective January 31, 1991.

10.1    Guaranty and  Indemnification  Agreement,  dated as of November 1, 1979,
        between the Registrant and American  Re-Insurance  Company  incorporated
        herein by reference to the Exhibit filed with the Registrant's Quarterly
        Report on Form 10-Q for the quarter ended November 25, 1979  (Commission
        File No. 0-1460).

10.2    Loan  Agreement,  dated  December  20,  1983,  between  the  Connecticut
        Development  Authority  and  the  Registrant,   incorporated  herein  by
        reference to Exhibit 10.10 to the Registrant's Registration Statement on
        Form S-4 (File No. 33-38646) effective January 31, 1991.

10.3    Security Agreement,  dated December 20, 1983, between the Registrant and
        the Connecticut Development Authority,  incorporated herein by reference
        to Exhibit 10.11 to the Registrant's  Registration Statement on Form S-4
        (File No. 33-38646) effective January 31, 1991.

10.4    Construction  and  Open-End  Mortgage  Deed from the  Registrant  to the
        Connecticut  Development  Authority  and  assigned  to  the  Connecticut
        National Bank, dated December 20, 1983, incorporated herein by reference
        to Exhibit 10.12 to the Registrant's  Registration Statement on Form S-4
        (File No. 33-38646) effective January 31, 1991.

10.5    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.

10.6    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.

10.7    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).

10.8    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).

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

10.10   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).
<PAGE>
10.11   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).

10.12   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).

10.13   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*

21.     Subsidiaries of the Registrant. *

23.      Accountant's Consent.*

27.1     Financial Data Schedule. *

27.2     Restated Financial Data Schedule. *


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


*Filed herein


<PAGE>


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

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

                                  SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

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

/s/ Francis E. Baker                     /s/ Robert P. Belcher
Francis E. Baker                         Robert P. Belcher, Treasurer
President                                and Chief Financial Officer
May 28, 1997                             May 28, 1997

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.

SIGNATURE                                TITLE                DATE

                                         Chairman
/s/ Oliver R. Grace, Jr.                 and                  May 28, 1997
---------------------
Oliver R. Grace, Jr.                     Director

                                         President, Chief
/s/ Francis E. Baker                     Executive Officer    May 28, 1997
Francis E. Baker                         and Director

/s/ Peter N. Bennett                                          May 27, 1997
Peter N. Bennett                         Director

/s/ John S. Grace                                             May 28, 1997
John S. Grace                            Director

/s/ Louis A. Lubrano                                          May 28, 1997
Louis A. Lubrano                         Director

/s/James J. Pinto                                             May 27, 1997
--------------------
James J. Pinto                           Director


<PAGE>



KPMG Peat Marwick, LLP Letterhead


                                           INDEPENDENT AUDITORS' REPORT

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

Under date of April 8, 1997, we reported on the  consolidated  balance sheets of
Andersen Group,  Inc. and  subsidiaries as of February 28, 1997 and February 29,
1996 and the related  consolidated  statements of  operations,  common and other
stockholders'  equity  and cash  flows for each of the  years in the  three-year
period ended February 28, 1997,  which are included in the Annual Report on Form
10-K for the year 1997.  In  connection  with our  audits of the  aforementioned
consolidated  financial  statements,  we also  audited the related  consolidated
financial statement schedules as listed in the accompanying index under Part IV,
Item  14.  The  financial  statement  schedules  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an  opinion  on the
financial statement schedules based on our audits.

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





/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 8, 1997



<PAGE>


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

                                            Consolidated Balance Sheet
                                                 February 28, 1997
                                              (amounts in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------- ------------------------------
<C>                                                                                             <S>   
Assets                                                                                           
Current assets:
Cash and cash equivalents                                                                         $2,304
Marketable securities                                                                              5,345
Accounts and other receivables, 
   less allowance for doubtful accounts                                                               53
Prepaid expenses and other assets                                                                    390
------------------------------------------------------------------------- ------------------------------
Total current assets                                                                               8,092
------------------------------------------------------------------------- ------------------------------
Investment in The J. M. Ney Company                                                               15,107
Investment in Digital GraphiX, Incorporated                                                        1,346
Property, plant and equipment, net                                                                 2,748
Other assets                                                                                       1,225
------------------------------------------------------------------------- ------------------------------
                                                                                                 $28,518
------------------------------------------------------------------------- ------------------------------
Liabilities, Redeemable Convertible Preferred 
    Stock and Common and Other Stockholders' Equity
Current liabilities:
Current maturities of long-term debt                                                               $ 586
Accounts payable                                                                                     101
Due to The J. M. Ney Company                                                                         316
Accrued liabilities                                                                                1,765
Deferred income taxes                                                                                564
------------------------------------------------------------------------- ------------------------------
Total current liabilities                                                                          3,332
------------------------------------------------------------------------- ------------------------------
Long-term debt, less current maturities                                                            6,540
Deferred income taxes                                                                                108
Commitments and contingencies
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
------------------------------------------------------------------------- ------------------------------
Common and other stockholders' equity: Preferred stock, 
    no par value; authorized 200,000 shares Common stock, 
    no par value; authorized 6,000,000 shares, issued 1,958,478 shares                             2,103
Additional paid-in capital                                                                         3,248
Retained earnings                                                                                  8,386
------------------------------------------------------------------------- ------------------------------
                                                                                                  13,737
Treasury stock, at cost, 24,000 shares                                                               (90)
------------------------------------------------------------------------- ------------------------------
Total common and other stockholders' equity                                                       13,647
------------------------------------------------------------------------- ------------------------------
                                                                                                 $28,518
------------------------------------------------------------------------- ------------------------------
</TABLE>
See accompanying notes to condensed financial information.
                                                        F-1


<PAGE>



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

                                         Condensed Statement of Operations
                                           Year ended February 28, 1997
                                   (amounts in thousands, except per share data)


<TABLE>
------------------------------------------------------- -----------------------------------

<C>                                                                                <S>
Revenues:
Investment and other income                                                          $ 267
Equity in earnings of The J. M. Ney Company                                          1,311
------------------------------------------------------- -----------------------------------
                                                                                     1,578
------------------------------------------------------- -----------------------------------
Costs and expenses:
General and administrative                                                           2,280
Interest expense                                                                       777
------------------------------------------------------- -----------------------------------
                                                                                     3,057
------------------------------------------------------- -----------------------------------
Loss from continuing operations
     Before income taxes                                                            (1,479)
Income tax benefit                                                                   1,778
------------------------------------------------------- -----------------------------------
Net income                                                                             299
Preferred dividend requirement                                                        (411)
Reversal of preferred dividend                                                         134
------------------------------------------------------- -----------------------------------
Income applicable to common shares                                                    $ 22
------------------------------------------------------- ----------------------------------
Earnings per share                                                                   $0.01

------------------------------------------------------- ----------------------------------
</TABLE>
See accompanying notes to condensed financial information.



















                                                        F-2


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

                           Condensed Statement of Cash Flows
                               Year ended February 28, 1996
                                   (amounts in thousands)
<TABLE>
----------------------------------------------------------- -----------------------------------
<C>                                                                                     <S>      
Cash flows from operating activities:
Net income                                                                                $299
Adjustments to reconcile net income to net cash used for operating activities:
Equity in earnings of The J. M. Ney Company                                             (1,311)
Depreciation, amortization and accretion                                                    167
Deferred income taxes                                                                       105
Net (gains) losses  from securities                                                       1,149
Purchases of securities                                                                  (1,625)
Proceeds from sales of securities                                                           526
Investment in Digital GraphiX                                                               (87)
Changes in operating assets and liabilities
Accounts and notes receivable                                                               652
Prepaid expenses and other assets                                                          (184)
Accounts payable, accrued liabilities and other
long-term obligations                                                                      (654)
----------------------------------------------------------- ------------------------------------
Net cash used for operating activities                                                     (963)
----------------------------------------------------------- ------------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment                                                   (7)
----------------------------------------------------------- ------------------------------------
  Net cash used for investing activities                                                    (7)
----------------------------------------------------------- ------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt                                                     (1,178)
Redemptions of preferred stock                                                             (392)
Dividends received from The J. M. Ney Company                                             1,150
----------------------------------------------------------- ------------------------------------
 Net cash used for financing activities                                                    (420)
----------------------------------------------------------- ------------------------------------
 Net decrease in cash and cash equivalents                                               (1,390)
 Cash and cash equivalents, beginning of year                                             3,964
----------------------------------------------------------- -----------------------------------
 Cash and cash equivalents, end of year                                                  $2,304
----------------------------------------------------------- -----------------------------------
Supplemental disclosure of cash flow information
Cash paid for:
 Interest                                                                                 $ 803
 Income taxes, net                                                                        $  85
----------------------------------------------------------- -----------------------------------
</TABLE>             
        See accompanying notes to condensed financial information.





                                                        F-3


<PAGE>


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

                                     Notes to Condensed Financial Information
                                                 February 28, 1997
NOTE 1 - GENERAL

The Condensed Financial  Information  presented herein is required for 1997 only
because the Registrant's majority owned subsidiary, The J. M. Ney Company (Ney),
entered into a Revolving  Credit and Deferred  Payment Sales  Agreement with two
banks in October 1996, which contained covenants that limit the transfer of cash
and other resources from 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 two
wholly owned  subsidiaries  which are immaterial to the  Registrant's  Condensed
Financial Information.

NOTE 2 - TRANSACTIONS WITH AFFILIATES

The Registrant and its majority 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  provided to the
Registrant  by  Ney:  maintenance,   accounting,  human  resources,   management
information  systems and the rental of office space in Ney's facility.  Services
provided by the  Registrant to Ney include the  following:  legal,  tax, and the
rental of manufacturing and office space in the Registrant's principal executive
offices. In addition,  during 1997 Ney paid the Registrant interest for the cost
of capital used by Ney.

In connection with Ney entering into the Revolving  Credit and Deferred  Payment
Sales  Agreement  referred to above,  the  Registrant and Ney entered into a Tax
Sharing Agreement,  effective as of March 1, 1996, which requires 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 Ney or any of its  subsidiaries  would
have been liable for in the particular year. The Tax Sharing  Agreement does not
require any  adjustments to be made for deferred  taxes and no such  adjustments
were made for the fiscal year ending  February 28, 1997. The Registrant  files a
consolidated Federal income tax return with its subsidiaries.

NOTE 3 - LONG TERM DEBT
<TABLE>
<CAPTION>

Long-term debt consists of the following (in thousands):
<C>                                                                                <C>
                                                                                      February 28, 1997                            



Mortgage note  payable due June 2001;  Interest at Varying  rates from 60-68% of
     the prime rate, as defined, 5.4% at February 28, 1997, payable semi
     -annually; semi-annual principal payments in escalating amounts from $59 in
     1997 to $78 at maturity; further secured by personal property                   $ 575
Convertible subordinated debentures, due October 2002;
     Interest at 10.5%, payable semi-annually; annual principal payments in 
     varying amounts through majority, unsecured                                     6,287
Other                                                                                  264
                                                                                   -------
                                                                                     7,126
Less current maturities                                                                586
                                                                                   --------
                                                                                     $6,540
                                                                                   --------
</TABLE>
                                                        F-4
<PAGE>
The  terms  of the  convertible  subordinated  debentures  call  for the  annual
redemption  of $834,000  face value of  debentures,  either  through open market
purchases  or  mandatory  sinking  fund  payments.  The Company may also make an
additional  optional  sinking  fund  payment of  $834,000.  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, 1997,  388,806 shares of common stock were
reserved for conversion.

Certain of the debt agreements contain restrictive  covenants which limit, among
other things, mergers or consolidations,  sales of assets,  additional long term
debt,  payments of dividends and stock repurchases.  Under the terms of the10.5%
Convertible  Subordinated  Debentures,  the  Company  had been  restricted  from
repurchasing  stock or paying  dividends since April 15, 1993 until such time as
the

Company's cumulative earnings, as defined, reach specified amounts. During 1997,
the  Company  obtained  the  consent  of a  majority  of the  holders  of  these
debentures to repurchase up to $6,000,000 of its capital stock.

Maturities  of  long-term  debt for each of the next  five  fiscal  years are as
follows (in thousands):
<TABLE>
<CAPTION>
                                 <C>                                <C>
                                  1998                                $586
                                  1999                                 974
                                  2000                                 986
                                  2001                                 999
                                  2002                                 876
                               Thereafter                            2,705
                                                                 ----------
                                                                     $7,126
                                                                 ----------

</TABLE>
NOTE 4 - REDEEMABLE CUMULATIVE CONVERTIBLE PREFERRED STOCK

See Note 9 to the Registrant's  Consolidated Financial Statements for the fiscal
year ended February 28, 1997 contained in Item 8 herein.

NOTE 5 - CASH DIVIDENDS

The amount of cash dividends paid to the Registrant by Consolidated Subsidiaries
during fiscal 1997 was approximately $1,150,000.















                                                        F-5


<PAGE>



<TABLE>
                              Andersen Group, Inc.
                 Schedule II - Valuation and Qualifying Accounts
                                              (Amounts in thousands)
<CAPTION>
                      
                            -----Additions-----------
                                            Balance         Charged to           Charged                               Balance
                                           beginning         costs and          to other                                 end
    Description                             of year          expenses            account        Deductions             of year
<S>                                            <C>               <C>             <C>              <C>                    <C>      
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)(c)          (46)(a)                $124
Warranty reserve                                $ 65               35                                                     $100
Discontinued operation                           $63                                               (63)(d)                  $0
Deferred income tax
    valuation allowance                         $483             (483)                                                      $0
------------------------------------------------------------------------------------------------------------------------------

February 28, 1995
Allowance for doubtful
    accounts                                    $427               47             (31)             (83)(a)               $360
Warranty reserve                                  $0               65                                                     $65
Discontinued operation                            $0               41              31              (9)(a)                 $63
Deferred income tax
    valuation allowance                         $458               25                                                    $483
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Write offs net of recoveries.
(b) Offset of discontinued operation losses.
(c) Transferred in connection with sale of certain assets of Dental Segment.
(d) Eliminated in connection with reduction in stock ownership of DGI in May
    1995.







                                                        F-6



<PAGE>


       
                           EXHIBIT INDEX
        
  No.                               Description                         Page No.


3.2      Amended and Restated By-Laws.                                       E-2

10.13    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.                                                E-3

21.      Subsidiaries of the Registrant.                                     E-4

23.      Accountant's Consent.                                               E-5

27.1     Financial Data Schedule.                                            E-6

27.2     Restated Financial Data Schedule.                                   E-7

                                   E-1