1 Revenues and (loss) income from continuing operations, exclude the results of operations of the Company's Ultrasonic segment as a result of its sale in February 1998.

For the year ended February 28, 2001 (FY01), the Company incurred a net loss applicable to common shareholders of $1,927,000, or $(0.94) per share, basic and diluted. During the fiscal year ended February 28, 2000 (FY00), the Company reported a net loss applicable to common shareholders of $1,349,000, or $(0.70) per share, basic and diluted. The results for FY01 include $730,000, or $0.36 per share, of the Company's equity in the losses of ABC Moscow Broadband Communication Ltd. (Moscow Broadband), which, in turn includes Moscow Broadband's 50% equity interest in the results of operations of ComCor TV.

For the year ended February 29, 2000 (FY00), the Company incurred a net loss applicable to common shareholders of $1,349,000, or $(0.70) per share, basic and diluted. During the fiscal year ended February 28, 1999 (FY99), the Company reported net loss applicable to common shareholders of $3,465,000, or ($1.80) per share basic and diluted.

Total revenues of $30,311,000 for FY00 were 28.4% higher than total revenues for FY99. The increase was due to a $4,705,000 improvement in Investment Income (Loss) and Other Income, and a 7.5% increase in net sales from The J.M. Ney Company (JM Ney).

During FY00, JM Ney's sales of $28,844,000 represent an increase of $2,006,000 over the sales levels reached in FY99. Such sales increase primarily reflected the pass-through effect of increased selling prices for products containing palladium as a result of higher market prices for this particular precious metal. During FY00, the average market value for palladium was approximately $392 per troy ounce, compared to approximately $302 per troy ounce during FY99. During each of the last three years, the market price for palladium has been both volatile and generally increasing. During FY00, the products sold by JM Ney contained approximately 19,600 troy ounces of palladium as compared to approximately 22,300 ounces shipped in products for FY99.

Fabrication sales during FY00 to JM Ney's former Dental affiliate were $650,000 lower than FY99 as a result of the expiration of an exclusive manufacturing agreement entered into in connection with the November 1995 sale of the net assets of the former Dental segment. Such fabrication sales generally involve much lower material components of cost of sales, and thus have a higher proportional contribution to absorbing fixed manufacturing overhead costs.

Activities which comprise Investment Income (Loss) and Other Income produced a net gain of $1,467,000 during FY00, as compared to a net loss of $3,238,000 which was incurred during FY99, as follows (in thousands):

The domestic portfolio loss in FY00 is comprised of net realized losses of $610,000 from the Company's portfolio of savings bank stocks, and $5,000 of realized gains from JM Ney's purchase and sale of two securities. The sale of investments in a Polish-based bank, appreciation in the value of a portfolio of Ukrainian securities, and the increase in value of a Russian equity fund contributed to the gains in the Russian and Eastern European portfolio. The Company sold its investment in VSMPO, which resulted in the realization of a gain from the prior year's recorded value.

During FY99, the market value for Russian securities decreased significantly resulting in an unrealized decline of 78% in the Company's portfolio of Russian, Ukrainian and Polish trading investments. In addition, a JM Ney investment in a Russian bond fund declined in value by approximately $299,000, or 60% of the original investment. The Company also wrote down the value of its long-term investments in IAS and VSMPO due to the Russian market conditions, and the perceived impact on the Company's ability to realize value from these investments in the near term.

Cost of sales during FY00 totaled $21,181,000, or 73.4% of net sales, as compared to $18,255,000, or 68.0% of net sales in FY99. The decline in gross margins from 32.0% to 26.6% was the result of the previously noted higher palladium prices, which were passed through to customers in the form of higher selling prices without a commensurate margin markup. Gross margins from sales totaled $7,663,000, which is $920,000 less than the gross margins reported for the prior year. This decrease of $920,000 consisted of $1,237,000 of losses due to the combination of higher precious metal acquisition prices and increased pension costs compared to the prior year and an increase in margins from operations of $317,000.

Due to rapidly escalating palladium prices during the final few weeks and days of FY00, JM Ney's metals management strategies were re-focused with the aim of controlling cash flow, accordingly, cost of sales includes two components that management associates with metals management rather than operating performance, a LIFO gain of $1.4 million resulting from reductions in inventory quantities which were recorded at prices substantially less than the current prevailing prices as required by the LIFO method of accounting; and additional charges to cost of sales totaling $1.8 million consisting of managed changes in the LIFO reserve, higher current precious metal prices and expenses relating to the precious metals hedging program. In FY99, JM Ney recognized $349,000 of LIFO gains from a decrease in its palladium inventory levels. For FY00, JM Ney would have recognized a net gain of $952,000 from these activities, except that a net expense of approximately $1,356,000 was created during the during the last week of the fiscal year when 2,000 ounces of palladium consignment borrowings were paid down and 800 ounces of platinum were purchased, each by using the deferred payment metal loan feature of the revolving credit agreement JM Ney has with its primary lender. The value of such deferred payment obligations varies with the market price of the underlying metals on which the loan is based, and is reflected as a liability in the Consolidated Balance Sheet. These transactions lowered the amount of the LIFO gains that would have otherwise been recognized by approximately $522,000, and created an additional expense of $834,000 based upon the market price for the metals in relation to the standard price of the metals as of the beginning of the fiscal year. These transactions did not change JM Ney's net economic exposure to price fluctuations in these metals, so this increased expense is indirectly reflected within the increased LIFO reserve at February 29, 2000.

Cost of sales was also affected in FY00 by $116,000 of pension expense, as compared to pension income of $368,000 that was recorded for FY99. This negative swing of $484,000, or 1.7% in margin rate, was caused by actuarial assumption changes and investment losses incurred by the Company's overfunded defined benefit plan.

During FY00, sales of precious metal materials in the form of wire, strip and rod, represented 30.4% of sales, as compared to 33.1% for FY99. Material products generally have lower average gross margins, due to the commodity nature of this product class, versus highly engineered parts and components, which involve more value-added processing and higher gross billing margins.

Selling, general and administrative expenses of $6,815,000 during FY00 represents a 10.5% increase from the costs of $6,170,000 incurred in the prior fiscal year. Corporate level costs increased primarily as a result of $300,000 of expenses incurred to support the negotiation of the joint venture arrangement with Moscow Telecommunications Company (COMCOR) and Moscow Broadband, of which the Company is currently a 25% shareholder, and related travel cost. In addition, JM Ney's expenses increased by approximately 7.5%, much of which was relating to higher sales and marketing costs.

Research and development expenses increased 16.7% to $2,203,000, or 7.6% of net sales, compared to $1,888,000, or 7.0% of net sales in FY99. The increase was attributable to effort expended to develop new alloys and expand JM Ney's technical competencies in meeting the changing requirements of its target markets, and to approximately $240,000 of costs that were formerly allocated to product costs.

Interest expense of $1,725,000 during FY00 was slightly lower than the $1,735,000 of interest expense incurred during FY99. JM Ney incurred increased interest expense on increased outstandings on its consignments borrowings, which also resulted in higher interest costs due to the increase in both the price and the lease rates for these borrowings. Corporate level interest cost declined primarily as a result of lower average principal outstandings on the 10 1/2% subordinated debentures.

An income tax benefit of $626,000 was recorded for FY00, which represents an effective tax rate of 38.8%, as compared to an income tax benefit of $1,484,000 for FY99, which represents an effective income tax benefit rate of 33.4%. The increase in the effective tax rate was primarily due to utilization of tax credits.

During FY00, the Company incurred $362,000 of preferred dividends as compared to $385,000, which were incurred in the prior fiscal year. The decline was primarily due to conversions of preferred shares into common shares in the fourth quarter.

At February 28, 2001, consolidated cash and marketable securities totaled $1,313,000 which is a decrease of $1,467,000, or 52.8%, from February 29, 2000. During FY01, the Company sold substantially all its remaining short-term investment portfolio. These proceeds were used to reduce intercompany advances from JM Ney which had been incurred to make principal payments on its 10 1/2% subordinated debentures. Additionally, as part of an overall deleveraging of its balance sheet, JM Ney used cash to reduce its short-term borrowings. .

During FY01, JM Ney reduced its inventory by $1,405,000, primarily through the reduction of approximately 3,300 ounces of gold. In addition JM Ney reduced its use of palladium to enable it to eliminate the entire consignment balance of 9,167 ounces that had been outstanding at February 29, 2000. It also reduced short-term borrowings, including borrowings of 2,000 ounces of palladium which were structured as a liability as of February 29, 2000. As a result, JM Ney's interest bearing borrowings were reduced by $8,504,000 during FY01.

During FY01, the prices of certain precious metals that JM Ney utilizes in the manufacture of its products experienced significant volatility. Primarily as a result of an increase in the value of palladium from February 2000 to February 2001, JM Ney's last-in first-out (LIFO) reserve with respect to its precious metals inventory increased by $1,826,000, from $4,938,000 to $6,764,000. This method of accounting allows JM Ney to maintain the net recorded value of these inventories at their historical values for both financial reporting and income tax reporting purposes.

At February 28, 2001, JM Ney was not in compliance with one of the covenants of its $7.5 million subordinated note payable. The bank waived the event of noncompliance as of that date and modified the same financial covenant for the following three fiscal quarters which the Company expects to meet. Under the terms of this agreement and the revolving credit agreement with the same commercial bank, JM Ney is restricted from making payments to the Company except as defined. The defined payments are primarily subject to JM Ney's meeting certain financial performance measurements. At February 28, 2001, approximately $1,182,000 of intercompany accrued liabilities were restricted from being made under such provisions of the loan agreements. At February 28, 2001, JM Ney's working capital was approximately $7,553,000 or 88.4% of consolidated net current assets, and its net worth, net of liabilities to the Company, including a $4 million subordinated note payable, totaled $6,122,000, or 45.3% of the Company's consolidated total shareholders' equity.

The Company is dependent upon allowed payments from JM Ney, which in FY01 totaled $411,000, net of restrictions, to meet its debt service, preferred dividend obligations and on-going operating expenses. Going forward, the Company expects that it will meet these requirements through at least March 2002 from future payments from JM Ney, from the receipt of additional royalties under terms of the sale of its former Ultrasonic Segment, rental income and proceeds of liquidations of existing investments, although there can be no assurance that such sources of cash will be sufficient. In April 2000, the Company repaid $200,000 of borrowings from its President, who also agreed to extend the maturity of a $1,000,000 note from August 2001 to April 2002.

In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" was issued. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Gains and losses resulting from changes in the values of those derivatives would be recognized immediately or deferred depending on the use of the derivative and if the derivative is a qualifying hedge. SFAS No. 133 is effective for the Company for the year ending February 28, 2002. The Company adopted SFAS No. 133 on March 1, 2001 and expects to record a cumulative transition adjustment loss of $47,000.

Statements contained in this Form 10-K that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. The Company cautions that a number of important factors could cause actual results for fiscal 2002 and beyond to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. Such statements contain a number of risks and uncertainties, including, but not limited to (i) economic and political developments in Russia and Eastern Europe; (ii) the ability of ComCor-TV to successfully implement its business plans, including the build-out of the network to access cable TV and Internet subscribers, and its ability to sign up such subscribers at or near planned levels, (iii) Moscow Broadband's ability to attract additional capital to further its investment in ComCor-TV, (iv) changes in technology that would affect JM Ney's products, or affect the value of the ultrasonic cleaning technology on which contingent consideration is based; (v) acceptance of new product developments and (vi) the price and volatility of precious metals. The Company cannot assure that it will be able to anticipate or respond timely to changes which could adversely affect its operating results in one or more fiscal quarters. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results may result in fluctuations in the price of the Company's common stock.

The Company and JM Ney are exposed to market risk from changes in certain commodity prices, primarily those of precious metals, from changes in interest rates, and from factors that affect equity investments in Russia and the Ukraine.

The Company has one Ukraine based common stock investment with a net reported value at February 28, 2001 of $40,000 and a longer-term indirect investment in ComCor-TV, a Russian cable television and Internet company, through its investment in Moscow Broadband, with a reported value of $3,354,000. In addition, JM Ney has an investment in a bond fund with a reported value of $56,000. The realizable value of the trading investments is subject to currency fluctuations, illiquid markets and political risks. The Company has no derivative financial instruments to hedge the risks associated with these investments.

The Company's investment in Moscow Broadband is also at risk based upon Moscow Broadband's ability to raise sufficient equity capital at appropriate values to enable it to provide ComCor-TV additional equity capital in order for Moscow Broadband to maintain its 50% equity share in ComCor-TV. Additionally, the degree of success of ComCor-TV to add sufficient subscribers for its cable television and Internet access services at adequate rates, and for ComCor-TV to obtain sufficient equity and debt financing to fund its infrastructure build out and near term projected operating losses, will also significantly affect the value of the Company's investment in Moscow Broadband.

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

Changes in the prices of commodities being borrowed under consignment lease or deferred payment borrowing arrangements can significantly affect JM Ney's cost of sales and its interest costs, as interest on these arrangements is charged based upon the market value of the underlying metal and the lease rate for that metal. Lease rates for palladium have fluctuated significantly in each of the last three fiscal years. At February 28, 2001, there were no outstanding precious metals leases or deferred payment borrowings of precious metals.

JM Ney has a revolving line of credit which bears interest at floating rates as described in Note 9 to the Company's consolidated financial statements. Neither the Company nor JM Ney hedges its interest rate risk. Based upon JM Ney's year-end balances, a 1% change in interest rates would affect its interest cost of its short-term cash borrowings by approximately $15,000.

During FY01 the leasing rates and market prices for palladium fluctuated significantly due to the volatility in the market price for palladium, leasing costs ranged from a high of 21.25% per annum to a low of 5.0%, with an unweighted average of approximately 9.2%. Market prices for palladium contracts ranged from $571 per troy ounce to $1,042 per troy ounce. At February 28, 2001, JM Ney had no precious metal borrowings under consignment or deferred pricing contracts.

ANDERSEN GROUP, INC.

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

ANDERSEN GROUP, INC.

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

ANDERSEN GROUP, INC.

Consolidated Statements of Changes in Stockholders' Equity

Years ended February 28, 2001, February 29, 2000 and February 28, 1999

(in thousands, except share data)

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

ANDERSEN GROUP, INC.

Consolidated Statements of Cash Flows

Years ended February 28, 2001, February 29, 2000 and February 28, 1999

(in thousands)

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

Andersen Group, Inc.

Notes to Consolidated Financial Statements

Years ended February 28, 2001, February 29, 2000, and February 28, 1999

(1) Nature of Business

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

(2) Summary of Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

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

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

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 as investment income or losses.

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

When fixed assets are sold or retired the cost and accumulated depreciation are eliminated and the resulting gains or losses are reflected in income.

The Company has a 25% ownership interest in ABC Moscow Broadband Communication Limited (Moscow Broadband), a Cyprus based limited liability company formerly known as Treglos Investments Limited. This investment is recorded using the equity method of accounting, initially using its cost basis, which was adjusted for an other than temporary decline in the investment in FY99, as more fully explained in Note 7. Moscow Broadband has a December 31 year end, and as a result, the Company's equity in Moscow Broadband's results is reported on a two month lag.

The Company capitalizes costs related to certain tooling items in accordance with EITF 99-5, "Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements." The tooling, which amounted to approximately $268,000 as of February 28, 2001, is amortized based on the units-of-production method.

Unamortized discounts on subordinated notes payable and notes payable to officer are being amortized over the term of the notes using the effective interest method.

Sales are recognized when title passes to the customer, which is generally when the products are shipped, the price is fixed and determinable, and collectibility is reasonably assured. Investment income (loss) and other income is recognized when earned and based on changes in the fair value of marketable securities and realized gains and losses.

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

In accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128), basic earnings per share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed based upon the weighted average number of common shares plus the assumed issuance of common shares for all potentially dilutive securities. See Note 14 for additional information and a reconciliation of the basic and diluted earnings per share computations.

The Company has entered into precious metal forward and futures contracts as hedges against precious metal fluctuations for firm price deliveries within 30 to 90 days. These contracts limit the Company's exposure to both favorable and unfavorable precious metals price fluctuations. The Company has qualified for hedge accounting based on criteria set forth in SFAS No. 80, "Accounting for Futures Contracts" and has assessed hedge effectiveness based on the probability that the results of the futures contract will substantially offset the effects of the anticipated transaction.

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

(3) Marketable Securities

Marketable securities consist of the following (in thousands):

(4) Inventories

Inventories consist of the following (in thousands):

At February 28, 2001 and February 29, 2000, inventories valued at LIFO cost comprised 57% and 67% of total inventories, respectively. At February 28, 2001, inventories valued at LIFO consisted of 6,054 troy ounces of gold, 7,150 troy ounces of silver, 2,110 troy ounces of platinum and 8,674 troy ounces of palladium. At February 29, 2000, inventories valued at LIFO consisted of 9,431 troy ounces of gold, 10,197 troy ounces of silver, 3,105 troy ounces of platinum and 8,687 troy ounces of palladium. Such quantities of precious metals exclude precious metals held by JM Ney subject to leasing arrangements with JM Ney's primary bank. During FY01 and FY00, JM Ney recognized LIFO (losses) gains of approximately ($75,000) and $1,400,000, respectively, from decreases in certain precious metal LIFO layers.

5. Discontinued Operations

Effective February 28, 1998, the Company sold the net assets of Ney Ultrasonics Inc. for which it recorded a gain of $97,000, net of income taxes based on the estimated proceeds of the sale. During FY99, the Company and the purchaser of the business reached a settlement agreement to resolve disputes relating to the final determination of the purchase price. This settlement, net of expenses incurred in excess of previous accruals, resulted in the recording of a loss of $116,000 in FY99 net of related tax benefits. The Company also earns royalties on technology transferred as part of the sale which is contingent on the sales of products. During FY01, FY00 and FY99, the Company recognized royalty revenue of approximately $95,000, $42,000 and $60,000, respectively.

(6) Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

Depreciation and amortization expense was $1,439,000, $1,380,000, and $1,350,000 in FY01, FY00, and FY99, respectively.

At each of February 28, 2001 and February 29, 2000, property, plant and equipment includes $539,000, respectively of machinery and equipment acquired under capital leases, which expire through FY03, with related accumulated amortization of $334,000 and $257,000, respectively.

(7) Investment in Moscow Broadband Communication Limited

In FY96 the Company invested in Moscow Broadband and from 1996 through January 2000 Moscow Broadband's primary asset was a 6% investment in the Institute for Automated Systems (IAS), a Moscow-based telecommunications company. During FY99, the Company recorded a $751,000 impairment loss of its investment to reflect an other than temporary decline in its value relating to the financial crisis in Russia at that time, reducing the reported value of its investment in Moscow Broadband to $84,000. In February 2000 Moscow Broadband completed a private placement of its common stock and raised approximately $18,000,000. The Company invested $4,000,000 in this private placement and received an additional $500,000 of common stock in return for expenses it incurred on behalf of Moscow Broadband since inception. At February 28, 2001, the Company has a 25% ownership interest in Moscow Broadband.

On January 31, 2000, Moscow Broadband entered into an agreement ("Joint Venture Agreement") with Moscow Telecommunications Corporation ("COMCOR") under which COMCOR and Moscow Broadband would fund the operations of ZAO ComCor-TV ("ComCor-TV") and maintain joint and equal control over ComCor-TV. ComCor-TV is developing a network to deliver cable television, high speed data transmission and Internet access, and IP telephony to up to 1,500,000 homes and businesses throughout the Moscow region. On April 24, 2000, pursuant to the Joint Venture Agreement, Moscow Broadband contributed $8,500,000 in cash, 10,722 shares of IAS, and agreed to contribute an additional $500,000 in cash during the year ending December 31, 2000. In return Moscow Broadband received a 50% ownership in ComCor-TV. Moscow Broadband accounts for its investment in ComCor-TV using the equity method of accounting. Moscow Broadband and COMCOR have each agreed to make additional contributions of approximately $20,000,000 to ComCor-TV, subject to ComCor-TV substantially adhering to the terms and condition of the Joint Venture Agreement.

The following presents summarized financial information for Moscow Broadband as of, and for the year ended December 31, 2000 (in thousands):

Moscow Broadband has a December 31 year end and as a result, the Company's equity in Moscow Broadband's results is reported on a two month lag. For the two month periods ended February 28, 2001 and February 29, 2000 Moscow Broadband's net loss was $516,000 (unaudited) and $423,000 (unaudited), respectively.

At February 28, 2001, the reported value of the Company's investment in Moscow Broadband was $3,354,000 and the Company's 25% equity in the net assets of Moscow Broadband as of December 31, 2000 was approximately $3,735,000. The $381,000 difference is attributed to a non-depreciable asset that has been transferred to ComCor-TV and will not result in the Company accreting the difference into its consolidated results of operations.

(8) Investment in VSMPO

During FY98, the Company invested approximately $1,225,000 in the common stock of AVISMA, a Russian titanium producer which was subsequently merged into VSMPO, a Russian titanium processing company. During FY99, this investment was written down to reflect an other than temporary impairment in its value. During FY00, the Company received net proceeds of approximately $317,000 from the sale of the investment and recorded a gain of $195,000 on the adjusted carrying value.

(9) Short-term Borrowings

JM Ney has an $8.0 million revolving credit and deferred payment sales agreement with a commercial bank which is secured by substantially all of JM Ney's assets. At February 28, 2001, JM Ney had unused availability under this line of $6,114,000. At JM Ney's election, interest is charged at the bank's prime rate, which was 8.5% and 8.75% at February 28, 2001 and February 29, 2000, respectively, at LIBOR plus 1.75% if the borrowing is fixed for a period of time, or at 1.75% over the bank's precious metals leasing rate if the borrowing is represented by deferred payment purchases of precious metals. A fee of 0.25% is charged on the unused balance of the facility. This agreement expires in December 2002 and includes restrictive covenants that limit the amount of dividends and other cash distributions from JM Ney to the Company. The agreement also contains certain financial covenants including a requirement for JM Ney to maintain a specified amount of stockholder's equity.

(10) Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

(11) Long-term Debt and Subordinated Notes Payable

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

The terms of the 2007 convertible subordinated debentures call for the annual redemption of approximately $431,000 of principal. The debentures are convertible into common stock of the Company at any time prior to maturity at $16.17 per share, subject to adjustment under certain conditions. At February 28, 2001, 186,642 shares of common stock were reserved for conversion.

At February 28, 2001, JM Ney was not in compliance with one of the financial covenants of the subordinated note payable. The bank waived the event of noncompliance and modified the same financial covenant for the following three fiscal quarters. In connection with the issuance of the subordinated note payable in FY96, JM Ney issued warrants to the lender to acquire 34,000 shares of its common stock at an exercise price of $1.00 per share, and warrants to acquire 6,000 shares at an exercise price of $10.00 per share. These warrants are exercisable at any time until December 2007, or six months after an initial public offering. The estimated fair value of these warrants of $205,000 has been recorded as a discount to the face amount of the note which is being amortized over the life of the note. The lender has an option to put these warrants back to JM Ney at the earlier of December 2002, or the date of an initial public offering of JM Ney's common stock on terms as defined in the agreement.

During FY00 the President and Chief Executive Officer loaned the Company $1,000,000 for the purpose of increasing the Company's investment in Moscow Broadband. The loan bears interest at the annual rate of 8.5 % to be paid quarterly, and is secured by a lien on the Company's real estate. The original maturity of the loan has been extended from August 2001 to April 2002. In connection with the loan the Company issued the officer warrants to acquire 18,706 shares of the Company's common stock at an exercise price of $16.04 per share. Such warrants are exercisable through February 2003. The estimated fair value of these warrants of $68,000 was recorded as a discount to the face amount of the loan , and is being amortized over the life of the loan. During FY01 the President and Chief Executive Officer loaned the Company $200,000. The loan bears interest at the annual rate of 8.5% to be paid quarterly, matures in August 2001, and is secured by a lien on the Company's real estate. In connection with the loan the Company issued the officer warrants to acquire 5,393 shares of the Company's common stock at an exercise price of $11.13 per share. Such warrants are exercisable through April 2003. The estimated fair value of these warrants of $18,000 was recorded as a discount to the face amount of the loan, and is being amortized over the life of the loan. During FY01, the Company paid the officer approximately $101,000 of interest pursuant to these notes.

Non-cash interest expense from the amortization of discounts and deferred financing costs totaled $150,000, $86,000 and $84,000 during FY01, FY00 and FY99, respectively.

Maturities of long-term debt for each of the next five fiscal years and thereafter are as follows as of February 28, 2001 (in thousands):

(12) Income Taxes

For FY01, FY00 and FY99, income tax (benefit) expense consists of the following (in thousands):

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

The principal components of the net deferred tax asset (liability) are as follows (in thousands):

At February 28, 2001, the Company had $443,000 of Federal credit carry-forwards, $406,000 of which were attributable to the alternative minimum tax that have no expiration date. The remaining general business credits, totaling $37,000 expire from 2002 through 2005. A valuation allowance of $669,000 has been established at February 28, 2001 against the general business credits, capital losses, equity in losses of Moscow Broadband, and unrealized losses on marketable securities to the extent it is more likely than not that these items will not be realized. The Company has $2,018,000 of Federal net operating loss carry forwards which expire in the fiscal years ending February, 2020 and February 2021.

13. Series A Cumulative Convertible Preferred Stock

The Company's Series A Cumulative Convertible Preferred Stock (Preferred Stock), has an annual dividend rate of $1.50 per share, that is paid quarterly. The Preferred Stock is convertible into the Company's common stock at any time at a rate of 1.944 shares of common stock for each share of Preferred Stock, subject to certain adjustments. At February 28, 2001, 391,135 shares of common stock have been reserved for conversion.

During FY01 and FY00, 15,663 and 39,552 shares of the Preferred Stock were converted into 30,447 and 76,886 shares, respectively, of the Company's common stock.

Holders of the convertible preferred stock have no voting rights, except as required by applicable law and except when among other things, accrued and unpaid dividends on the convertible preferred stock are equal to or exceed the equivalent of six quarterly dividends payable on the convertible preferred stock such holders will be entitled to elect one director to the Company's board of directors until the dividend arrearage has been paid or amounts have been set apart for such payment. The convertible preferred stock is senior to the common stock with respect to dividends and liquidation events.

14. Loss Per Share

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

For FY01, FY00 and FY99, the net addition of 28,078, 16,777 and 12,835 common share equivalents, respectively, from the assumed exercise of stock options using the treasury method have been excluded, because of their antidilutive effects .

For each of FY01, FY00 and FY99, the effects of the conversion of the Preferred Stock and the 10 1/2% Convertible Subordinated Debentures have been excluded because the impacts of such conversions would have been antidilutive.

The Company's and JM Ney's incentive stock option plans provide for option grants to directors and key employees at prices equal to at least 100% of the stock's fair market value at date of grant. Options generally vest over three years and have a maximum term of ten years. All options granted during FY01 and FY99 had an exercise price equal to the fair market value as of the date of grant. The per share weighted average fair value of stock options granted during FY01 and FY99 under the AGI plan was $8.18 and $3.44, respectively, using the Black Scholes option pricing model with the following weighted average assumptions: expected dividend yield of 0%, risk-free interest rate of 6%, expected life of five to seven years, and expected volatility of 80% and 33%, respectively.

Grants of options in FY01 and FY99 under the JM Ney plan had a fair value of $7.61 and $9.43 per share, respectively, based upon an expected dividend yield of 0% risk-free interest rate of 6%, expected life of five years, and expected volatility of 33%.

The Company has adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation". Accordingly, no compensation expense has been recognized for the stock option plans. Had compensation cost for the Company's stock option plans, including the JM Ney plan, been determined based on the fair value on the grant date for awards during FY01, FY00 and FY99 consistent with the provisions of SFAS No. 123, the Company's net loss applicable to common shares, and loss per share would have adjusted to the pro forma amounts indicated below (amounts in thousands, except per share data):

The Company has reserved 102,700 shares of common stock for the exercise of stock options. At February 28, 2001, the Company's plan had expired, and accordingly, no future options can be granted under the Plan. JM Ney has reserved 119,250 shares of its common stock for the exercise of stock options, of which 12,200 were available for issuance at February 28, 2001.

Activity under the Company's plan, which excludes JM Ney's plan, was as follows:

At February 28, 2001, the range of exercise prices and the weighted average remaining contractual life of the options was as follows:

Options Outstanding Options Exercisable

Also, during FY01 and FY99, options to purchase 2,000 and 4,250 shares of JM Ney, at average exercise prices of $11.17 and $11.47 per share, respectively, were issued. During FY01, FY00 and FY99, options to acquire 500, 6,500, and 7,750 shares, respectively, of JM Ney were forfeited. During FY01 and FY00, options to acquire 21,000 and 9,750 shares, respectively, were exercised, and the resultant shares were simultaneously repurchased by JM Ney for net consideration of $24,000 and $16,000, respectively. At February 28, 2001, 113,050 of the 126,550 total outstanding JM Ney options were exercisable. At February 28, 2001, the Company owned all 850,000 outstanding shares of JM Ney. There presently is no public market for JM Ney's common stock.

The Company maintains a noncontributory defined benefit plan and a defined contribution plan, which collectively cover substantially all full-time employees. The defined contribution plan is funded through employee contributions and employer matching contributions. Pension expense for the Company's defined contribution plan totaled $223,000, $208,000, and $189,000, in FY01, FY00 and FY99, respectively The defined benefit plan held 12,250 shares of the Company's stock at February 28, 2001 and February 29, 2000.

The following table sets forth the changes in benefit obligations, changes in fair value of plan assets, funded status and net amounts recognized in the Consolidated Balance Sheets for the defined benefit plan (in thousands). Such amounts are reported on a two month lag to coincide with the December 31 fiscal year for the plan.

For FY01, FY00 and FY99, the projected benefit obligations and pension (expense) income were determined using the following assumptions:

Net pension expense (income) for the Company's funded defined benefit plan for FY01, FY00 and FY99 includes the following components (in thousands):

At February 28, 2001 and 2000, the accumulated benefit obligation for its unfunded retiree health care plan was approximately $697,000 and $736,000, respectively and the net unrecognized actuarial gain was approximately $115,000 and $325,000, respectively. The Company's cost for this plan for FY01, FY00, and FY99 was approximately $2,000, $7,000, and $18,000, respectively, including interest and amortization of unrecognized net actuarial gain. Benefit payments made under this plan for FY01, FY00, and FY99 were approximately $41,000, $40,000, and $52,000 respectively. At February 28, 2001, 35 retirees and their spouses were receiving benefits under this plan.

The accumulated benefit obligation was determined using the unit credit method and assumed discount rates of 7.25% at February 28, 2001, February 29, 2000 and February 28, 1999. At February 28, 2001 and February 29, 2000, the accumulated benefit obligation was compiled using assumed health care cost trend rates of 10% , gradually declining to 6% for the remainder of the projected payout period of the benefits.

The estimated effect on the present value of the accumulated benefit obligation at March 1, 2001 of a 1% increase each year in the health care cost trend rate used would result in an estimated increase of approximately $2,000 in the service and interest cost, and approximately $41,000 in the accumulated benefit obligation. A 1% decrease each year in the health care trend rate would result in a decrease of approximately $2,000 in the service and interest costs, and a decrease of approximately $37,000 in the accumulated benefit obligation.

The Company leases various manufacturing and office facilities and equipment under operating lease agreements expiring through December 2005. In addition, the Company earns rental income from office space leased to tenants under operating leases expiring through November 2004. Lease expense was $472,000, $382,000, and $299,000, for FY01, FY00 and FY99, respectively, while rental income totaled $445,000, $376,000 and $482,000 for FY01, FY00, and FY99, respectively.

Future minimum lease payments and rental income under the terms of the leases for each of the next five years, are as follows as of February 28, 2001(in thousands):

The above amounts include the principal portion of capital lease payments of $96,000 in FY02 and $9,000 in FY03.

(19) Restructuring Costs

In February 2001, JM Ney announced a restructuring of its operations which involved the reduction of 33 employees from its workforce. The estimated cost of this restructuring which is primarily comprised of severance payments and benefits is $256,000, of which $134,000 was paid prior to February 28, 2001. Such costs do not include a curtailment gain from the Company's defined benefit retirement plan as such gains were applied against unrecognized net actuarial losses of the plan. The remaining costs are expected to be paid by the end of the second quarter of FY02.

During FY01, the Company operated in two continuing segments, Electronics, which comprises the operations of JM Ney, and Corporate, which includes the Company's investment, real estate and corporate administrative activities. Operating income (loss) consists of revenues, less all non-interest costs and expenses directly allocated to the industry segments. Corporate revenues consist of investment income (loss) and other income not attributable to the Electronics segment. Corporate identifiable assets include assets not directly attributable to JM Ney.

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

Export sales for FY01, FY00, and FY99 were $9,552,000, $5,941,000 and $4,303,000, respectively. Such sales were made primarily to customers in Europe and the Pacific Rim.

During FY01, FY00, and FY99 sales to one customer accounted for 14.4%, 17.7%, and 16.1% of net sales, respectively. At February 28, 2001 and February 29, 2000 accounts receivable from this customer represented 14.7% and 19.1%, respectively, of consolidated net accounts receivable. In addition, sales to one other customer accounted for 13.9% of net sales during FY99.

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

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. At February 28, 2001 the fair value of the Company's 10.5% convertible debentures was approximately $2,294,000 based on a recent quoted market value of the security.

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

As of February 28, 2001, the Company held contracts to purchase 486 ounces of palladium over the following three months at an average price of $961 per ounce. Losses on these contracts of $47,000 net of tax effects of $27,000 based on quoted futures prices, have been deferred and included within accumulated other comprehensive income. The losses will be recognized in the Consolidated Statement of Operations when the product deliveries being hedged have been made.

In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" was issued. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Gains and losses resulting from changes in the values of those derivatives would be recognized immediately or deferred depending on the use of the derivative, and if the derivative is a qualifying hedge. SFAS No. 133 is effective for the Company for the fiscal year ending February 23, 2002. The Company adopted SFAS No. 133 on March 1, 2001 and expects to record a cumulative transition adjustment loss of $47,000.

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

During FY01 and FY00, the Company issued 30,447 and 76,886 shares respectively, of its common stock from the conversion of preferred stock; and during FY00 it issued 988 shares of its common stock from its treasury from conversion of 10 1/2% convertible notes.

(25) Related Party Transactions

During FY01, the Company allocated approximately $204,000 of expenses to Moscow Broadband for administrative services provided.

At February 29, 2000, the Company's Chairman was indebted to the Company in the amount of $223,487. During FY01, $111,743 of this amount was forgiven as compensation. The Chairman remains indebted to the Company for the remaining portion of this unsecured, non-interest bearing note which matures in June 2001.

Also, in April 2000, the Company received $50,000 from its Chairman in exchange for an unsecured demand note bearing interest at the annual rate of 10%. This note was repaid in May 2000.

(26) Quarterly Financial Data (unaudited)

/s/PricewaterhouseCoopers LLP

Hartford, Connecticut

May 24, 2001

We have audited the accompanying consolidated balance sheet of Andersen Group, Inc. and subsidiaries as of February 29, 2000 and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years ended February 29, 2000 and February 28, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Andersen Group, Inc. and subsidiaries at February 29, 2000, and the results of their operations and their cash flows for the years ended February 29, 2000 and February 28, 1999 in conformity with accounting principles generally accepted in the United States of America.

/s/Deloitte & Touche LLP

Hartford, Connecticut

May 3, 2000

Current assets

(Unaudited) (Unaudited)

Use of Estimates

Cash and Cash Equivalents

To the Board of Directors and

Shareholders of ABC Moscow Broadband Communication Limited

In our opinion, the accompanying balance sheet and the related statements of operations, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of ABC Moscow Broadband Communication Limited at December 31, 2000, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Hartford, Connecticut

May 22, 2001

Note December 31, 2000