RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board issued Statement No. 143, "Accounting for Asset Retirement Obligations" (FAS 143). This standard requires us to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and effective for our fiscal year 2003. The Company does not expect the impact, if any, arising from adoption of this standard to be material to its financial position.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, "Amendment of FASB Statement No. 13 and Technical Corrections". SFAS 145 concludes that debt extinguishment used as part of a company's risk management strategy should not be classified as an extraordinary item. SFAS 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The Company believes that adoption of this standard will not have a significant impact, if any, to its financial position.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure". SFAS 148 amends SFAS No. 123 "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  The Company adapted the provisions of this new standard in FY03.  The adoption of SFAS 148 did not have a material effect on our financial position or results of operations. The adoption of SFAS 148 did result in a modification of disclosure in our financial statements.

In November 2002, the FASB issued FASB Interpretation, "Guarantor's Accounting and Disclosure Requirements, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45") . FIN 45 clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing certain guarantees. FIN 45 also expands the disclosure to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. The provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for the Company in 2003. The Company believes that FIN 45 will not have a significant impact, if any, to its financial position or results of operations.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has a contingent liability with respect to a $386,000 letter of credit used by its bank to secure performance bonds issued in connection with an unresolved state income tax matter. The Company believes that its accruals are sufficient to meet any obligations that may arise from this matter.

The Company is also party to certain operating leases which will require $123,000 of payments to be made during FY04.

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

The Company is exposed to market risk from changes in equity security prices, interest rates and from factors that impact equity and operational investments in Russia.

Foreign Investment Risk

The Company's investment in MBC and its subsequent direct investment into CCTV are subject to currency fluctuations, illiquid markets and political risks associated with Russia. The Company has not entered into any derivative instruments to hedge the risks associated with these investments. These investments also bear the risk of CCTV's ability to increase its revenues through the addition of subscribers for its cable television, high speed data transmission and Internet services. The subscriber growth is largely dependent upon CCTV's ability to build-out its access network from the MFON which it leases from COMCOR, which is largely dependent upon it receiving a sufficient amount of capital to pay for the equipment and construction costs.

12

Equity Risk
At February 28, 2003, the Company held common stocks totaling $1,809,000, most of which are the stocks of financial institutions. The Company bears the risk of the fluctuations of the market prices of these companies.

Interest Rate Risk
At February 28, 2003, the Company had no variable rate financing arrangements, and accordingly, its exposure to interest rate risk was limited to the interest rates it receives on its invested cash, a substantial portion of which has since been invested into CCTV.

ITEM 8.              FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 The consolidated Financial Statements are filed as part of this Report. 

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

 None.

PART III

ITEM 10.              DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 

The information required by this Item with respect to the identity and business experience of our executive officers is set forth on page 7 in Item I of this report under the caption "Executive Officers of the Company".

The other information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934 for the Annual Meeting of Shareholders scheduled to be held June 20, 2003.

ITEM 11.              EXECUTIVE COMPENSATION.

The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934 for the Annual Meeting of Shareholders scheduled to be held June 20, 2003 under the caption "Executive Compensation".

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

Equity Compensation Plan Information
The Company adopted a stock incentive plan to provide incentives to attract and retain officers, directors and key employees.  Our incentive stock option plan expired during FY01, and accordingly, as of February 28, 2003, we are not able to issue new grants pursuant to a plan approved by our shareholders.  At February 28, 2003, the outstanding options and warrants relate to options issued pursuant to the expired plan, options granted to a director during FY01 that were issued without a plan and warrants issued in connection with a loan from an officer/director.  The following table sets forth a description of our equity compensation plan as of February 28, 2003:
 

13

Equity compensation issued pursuant to plans not approved by security holders includes 20,000 non-qualified stock options issued during the fiscal year ended February 29, 2001 and warrants issued in connection with a loan received from an officer.  The loan was repaid in full with interest, and the warrants subsequently expired without being exercised.

Additional information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934 for the Annual Meeting of Shareholders scheduled to be held on June 20, 2003 under the captions "Election of Directors", and "Equity Security Ownership".

 ITEM 13.               CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934 for the Annual Meeting of Shareholders scheduled to be held on June 20, 2003 under the caption "Certain Relationships and Related Transactions".

ITEM 14.               CONTROLS AND PROCEDURES.

Disclosure Controls and Internal Controls

The Company's disclosure controls and procedures (as defined in Rule 13a-14(c) under the Exchange Act) ("Disclosure Controls") are procedures that are designed with the objective of ensuring that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this annual report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.  Disclosure Controls are also designed with the objective of ensuring that this information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  Internal controls and procedures for financial reporting ("Internal Controls") are procedures that are designed with the objective of providing reasonable assurance that:

• the Company's transactions are properly authorized;
• assets are safeguarded against unauthorized or improper use; and
• transactions are properly recorded and reported,

in each case all to permit the preparation of the Company's financial statements in conformity with U.S. generally accepted accounting principles.

Limitations on the Effectiveness of Controls

The Company's management, including its Chief Executive Officer and Chief Financial Officer, does not expect that our Disclosure Controls or Internal Controls will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control.  The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures related to the control may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Annual Evaluation of the Company's Disclosure Controls and Internal Controls

Within the 90-day period prior to the filing of this annual report, an evaluation was carried out under the supervision and with the participation of Company management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's Disclosure Controls.  Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded, subject to the limitations noted above, that:  

• the design and operation of the Company's Disclosure Controls were effective to ensure that material information related to the Company's company which is required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded processed, summarized and reported within the time periods specified in SEC rules and forms; and
• the Company's Internal Controls are effective to provide reasonable assurance that the Company's financial statements are fairly presented in conformity with U.S. generally accepted accounting principles. 

14

No significant changes were made to the Company's Internal Controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.  

 15

PART IV

ITEM. 15.              EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. 

(a)(1)       Consolidated Financial Statements applicable to the Registrant are contained in Item 8 as well as the financial statements of its unconsolidated subsidiary MBC and those of MBC's unconsolidated subsidiary, CCTV.

(a)(2)     Consolidated Financial Statement Schedules

Schedules

II Valuation and Qualifying Accounts

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: 

*Filed herein. 

17

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1924, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 28, 2003.

 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.

 18

CERTIFICATIONS
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Oliver R. Grace, Jr., President and Chief Executive Officer of Andersen Group, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Andersen Group, Inc.;
   
   
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
   
   
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
   
   
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
   
   

             a)       designed such disclosure controls and procedures to ensure that material information relating to the         registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

            b)       evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

            c)       presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
   
   

        a)       all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

          b)       any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this annual report whether or not there

were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

19 

I, Andrew M. O'Shea, Chief Financial Officer of Andersen Group, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Andersen Group, Inc.;
   
   
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
   
   
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
   
   
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
   
   

        a)       designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

        b)       evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

        c)       presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
   
   

        a)       all significant deficiencies in the design or operation of internal controls which could adversely  

        affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

        b)    any fraud, whether or not material, that involves management or other employees who have a            significant role in the registrant's internal controls; and

6.     The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 20 

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.

 21 

ANDERSEN GROUP, INC.
Consolidated Balance Sheets
February 28, 2003 and February 28, 2002
(in thousands, except per share data)
 

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

22

ANDERSEN GROUP, INC.
Consolidated Statements of Operations
Years ended February 28, 2003, February 28, 2002 and February 28, 2001
(in thousands, except per share data)

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

23

ANDERSEN GROUP, INC.
Consolidated Statements of Changes in Stockholders' Equity
Years ended February 28, 2003, February 28, 2002 and February 28, 2001
(in thousands, except per share data)

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

24

ANDERSEN GROUP, INC.
Consolidated Statements of Cash Flows
Years ended February 28, 2003, February 28, 2002 and February 28, 2001
(in thousands)

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

25

ANDERSEN GROUP, INC.
Notes to Consolidated Financial Statements
Years ended February 28, 2003 and February 28, 2002
 

(1)           Nature of Business

Andersen Group, Inc. ("the Company") is a diversified holding company which has an indirect investment in ZAO CCTV ("CCTV"), a Moscow-Russia based provider of cable television, high speed data transmission and Internet access services.  The Company expects to acquire 100% of CCTV pursuant to agreements it entered into in May 2003, which replaced earlier agreements it had signed in April 2002, and subsequently amended in August 2002 and  September 2002.  See Notes 6 and 23 for descriptions of the transaction and the most recent terms.  The Company also invests in both marketable and other securities of domestic and foreign-based companies.  In March 2002, the Company sold the operating assets of its principal operating subsidiary, The J.M. Ney Company ("JM Ney") which was a manufacturer of 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

Use of Estimates
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.

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

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

Marketable Securities
The Company's common stock investments 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
Inventories were stated at the lower of cost or market.  Cost was determined using the last-in, first-out ("LIFO") method for precious metals, and at standard costs which approximate the first-in, first-out ("FIFO") method for the balance of the inventories. 

Property, Plant and Equipment
Property, plant and equipment 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.

Investment in Moscow Broadband Communication Limited
The Company has a 25% ownership interest in ABC Moscow Broadband Communication Limited ("MBC"), a Cyprus based limited liability company which in turn has a 50% equity interest in CCTV. This investment bears currency, economic and political risks relating to Russia in addition to other business risks associated with a venture capital investment.  This investment is recorded using the equity method of accounting.  MBC has a December 31 year end, and as a result, the Company's equity in MBC's results is reported on a two-month lag.

Debt Discounts
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.
 

26

Deferred Compensation
The Company has established irrevocable trusts to fund the deferred compensation of certain executives.  The assets of the trusts are owned by the Company and subject to the claims of its general creditors, and are reported on the Company's consolidated balance sheet in accordance with the consensus in EITF 97-14.  Income and changes in the value of the trusts' assets are reported within Investment and Other Income with corresponding adjustments to the deferred compensation obligation and compensation expense.

Revenue
Investment income and other income is recognized when earned and is based on changes in the fair value of marketable securities and realized gains and losses.  Rental income from the lease of JM Ney's real estate is recognized on a straight line basis over the terms of the lease.

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

Earnings Per Share
In accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"), basic earnings per share is computed based upon the weighted average number of common shares outstanding during the period.  Diluted earnings per share is computed based upon the weighted average number of common shares plus the assumed issuance of common shares for all potentially dilutive securities.  See Note 12 for additional information and a reconciliation of the basic and diluted earnings per share computations.

Recently Issued Accounting Standards
In July 2001, the Financial Accounting Standards Board issued Statement No. 143, "Accounting for Asset Retirement Obligations" (FAS 143). This standard requires us to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and effective for our fiscal year 2003. The Company does not expect the impact, if any, arising from adoption of this standard to be material to its financial position.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections". SFAS 145 concludes that debt extinguishment used as part of a company's risk management strategy should not be classified as an extraordinary item. SFAS 145 also requires sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The Company believes that adoption of this standard will not have a significant impact, if any, to its financial position.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure". SFAS 148 amends SFAS No. 123 "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.  The Company adopted the provisions of this new standard in FY03.

In November 2002, the FASB issued FASB Interpretation, "Guarantor's Accounting and Disclosure Requirements, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45") . FIN 45 clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing certain guarantees. FIN 45 also expands the disclosure to be made by a guarantor in its financial statements about its obligations under certain guarantees that it has issued. The provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for the Company in 2003. The Company believes that FIN 45 will not have a significant impact, if any, to its financial position or results of operations.

Reclassification
Certain reclassifications have been made to the prior years' financial statements to reflect the assets of JM Ney as held for sale and the results of its operations as discontinued in order to conform with the current year presentation.

27

(3)           Discontinued Operations - Sale of Assets of JM Ney

Effective March 22, 2002, the Company sold the operating assets of JM Ney to Deringer Mfg. Company ("Deringer") for which it received approximately $10,990,000, of which $600,000 was placed in an escrow account to satisfy potential claims relating to inventory and representations made by the Company to Deringer.  The Company has recorded a gain of $1,472,000 from this sale, after income taxes of $686,000. The following summarizes the elements of the transaction (in thousands):

 Transaction expenses related to the sale of JM Ney are as follows (in thousands):

For the years ended February 28, 2003 ("FY03"), February 28, 2002 ("FY02") and February 28, 2001 ("FY01"), JM Ney's summarized results of operations were as follows (in thousands):

 The February 28, 2002 consolidated balance sheet has been reclassified to reflect the net assets of JM Ney which were held for sale, as follows (in thousands):

In connection with the asset sale, the Company entered into an eight-year lease with Deringer for the lease of JM Ney's manufacturing facility.  The lease calls for the Company to receive monthly rental payments at the annual rate of $290,000 with annual increases of the annual lease rate of $5,800. 

28

(4)           Inventories

Inventories consist of the following (in thousands): 

 The Company's precious metal inventory records are maintained on a first-in, first-out (FIFO) basis, which values the inventory equivalent to market or replacement cost.  The Company records a LIFO reserve, which represents the excess of replacement cost over the historical LIFO value of the precious metal content of inventories.

At February 28, 2002, inventories valued at LIFO cost comprised 44% of total inventories.  At February 28, 2002, the precious metal components of inventories before the LIFO reserve consisted of 2,708 troy ounces of gold recorded at $298 per ounce; 3,975 troy ounces of silver recorded at $4.50 per ounce; 1,380 troy ounces of platinum recorded at $475 per ounce, and 3,759 troy ounces of palladium recorded at $380 per troy ounce.  Such quantities of precious metals exclude precious metals held by JM Ney on consignment subject to leasing arrangements with JM Ney's primary bank or for the benefit of its customers. 

(5)           Property, Plant and Equipment

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

 During FY02, Andersen Realty, Inc., a wholly-owned subsidiary of the Company, sold a 108,000 square foot office building located in Bloomfield, Connecticut to a private buyer for proceeds of $1,692,000, net of transaction costs of $209,000.  The buyer also assumed a sewer lien on the property of approximately $56,000.  The Company recorded a loss on the sale of $197,000.  The Company recorded rental income related to the building of $272,000 and $445,000 for FY02 and FY01.

29

(6)           Investment in Moscow Broadband Communication Limited

At each of February 28, 2003 and February 28, 2002, the Company had a 25% ownership interest in MBC which was accounted for using the equity method of accounting.  In April 2002 the Company entered into agreements pursuant to which the Company will acquire 100% of CCTV in exchange for the issuance of Company common stock for COMCOR's equity interest in CCTV and for the 75% of MBC that the Company does not presently own.  In April 2003 these agreements were terminated and new agreements were entered into, the execution of which will also result in the Company acquiring 100% of CCTV.  See note 22 for further details of the amended terms.

During FY01, MBC entered into an agreement with Moscow Telecommunications Corporation ("COMCOR") under which COMCOR and MBC would fund the operations of CCTV and maintain joint and equal control over CCTV. CCTV 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, MBC contributed $8,500,000 in cash, 10,722 shares of the Institute for Automated Systems ("IAS"), a Moscow-based telecommunications company, and agreed to contribute an additional $500,000 in cash during the year ending December 31, 2000. In return, MBC received a 50% ownership in CCTV. MBC accounts for its investment in CCTV using the equity method of accounting.

The following presents summarized financial information for MBC as of December 31, 2002 and 2001, and for the years ended December 31, 2002, 2001 and 2000 (in thousands):

The following presents summarized financial information for CCTV as of, and for the years ended December 31, 2002 and 2001 (in thousands): 

MBC has a December 31 year end and, as a result, the Company's equity in MBC 's results is reported on a two-month lag. For the two-month periods ended February 28, 2003 and 2002, MBC's net loss was $464,000 (unaudited) and $386,000 (unaudited), respectively.

At February 28, 2003, the reported value of the Company's investment in MBC was $1,971,000 and the Company's 25% equity in the net assets of MBC as of December 31, 2002 was approximately $2,352,000. The $381,000 difference is attributed to a non-depreciable asset that was transferred to CCTV and will not result in the Company accreting the difference into its consolidated results of operations.

(7)           Short-term Borrowings

JM Ney had an $8.0 million revolving credit and deferred payment sales agreement with a commercial bank which was collateralized by substantially all of JM Ney's assets.  Borrowings under this agreement were repaid with the proceeds of the sale of JM Ney's operating assets and the agreement was terminated.

(8)           Accrued Liabilities and Other Long-Term Obligations

Accrued liabilities and other long term obligations consist of the following (in thousands): 

31

 (9)           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, 2003, 128,695 shares of common stock were reserved for conversion.

Maturities of long-term debt for each of the next five fiscal years as of February 28, 2003 are as follows (in thousands): FY04- $407; FY05 - $431; FY06 - - $431; FY07 - $431 and FY08 - $381.

(10)         Income Taxes  

For FY03, FY02 and FY01, income tax expense (benefit) consists of the following (in thousands): 

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

32

The principal components of the net deferred tax assets (liability) as of February 28, 2002 and 2001 are as follows (in thousands): 

At February 28, 2003, the Company had $196,000 of Federal alternative minimum tax credit carry-forwards that have no expiration date.   A valuation allowance of $1,181,000 has been established at February 28, 2003 against the equity in losses of Moscow Broadband to the extent it is more likely than not that these items will not be realized.

 (11)         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 1.946 shares of common stock for each share of Preferred Stock, subject to certain adjustments. At February 28, 2003, 365,859 shares of common stock have been reserved for conversion.

During FY02 and FY01, 13,195, and 15,663 shares of the Preferred Stock were converted into 25,650 and 30,447 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.

(12)         Income (Loss) Per Share

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