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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2003

OR

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

For the transition period from ________ to ___________

Commission file number: 0-1460 

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

                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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No ____

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 
Yes ____   No x 

As of January 14, 2004 there were 2,099,908 shares of the Registrant's $0.01 par value common stock outstanding.
 

ANDERSEN GROUP, INC.
FORM 10-Q

TABLE OF CONTENTS

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Part I.  Financial Information
Item 1.  Financial Statements

 ANDERSEN GROUP, INC.
Consolidated Condensed Balance Sheets
(In thousands)

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

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ANDERSEN GROUP, INC.
Consolidated Condensed Statements of Operations
(In thousands, except per share data)
(unaudited) 

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

4

ANDERSEN GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(In thousands)
(unaudited)

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ANDERSEN GROUP, INC.
Notes to Consolidated Condensed Financial Statements (unaudited)

(1)                Accounting Policies

The accompanying unaudited interim financial statements and related notes should be read in conjunction with the audited Consolidated Financial Statements of Andersen Group, Inc. (the "Company") and related notes as contained in the Annual Report on Form 10-K for the fiscal year ended February 28, 2003.  The interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of such statements.  The Company has incurred and expects in the near future to continue to incur operating losses.  Management believes that unless the Company is able to secure additional financing, its cash and cash equivalents and short-term investments will not be sufficient to enable it to meet its operating expense and debt service requirements for the next twelve months and also the funding requirements into ZAO ComCor-TV ("CCTV") as set forth in the Subscription Agreement with Moscow Telecommunications Corporation ("COMCOR") (see note 5) which it expects to enter into during the fourth quarter of the current fiscal year.  Accordingly, if this contingency has not been resolved prior to August 31, 2004, the Company expects that it may not make all of the capital contributions to CCTV which the Company will be committed to make upon the closing of the acquisition of CCTV. 

The accompanying interim consolidated financial statements reflect the Company's belief that it can continue as a going concern, and its belief that CCTV can continue as a going concern which are, in turn, based on the belief that both the Company and CCTV can continue with its existing resources or upon the likelihood that additional capital resources can be obtained to support both the Company's and CCTV's operating plans.  If management's assessments are incorrect, the Company may be required to reduce the reported values of certain assets and incur additional expenses.  The accompanying interim consolidated financial statements do not provide for such loss contingencies. 

Recently Issued Accounting Standards
In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, Consolidation of Variable Interest Entities (VIE), an interpretation of ARB No. 51, which requires all VIEs to be consolidated by the primary beneficiary.  The primary beneficiary is the entity that holds the majority of the beneficial interests in the VIE.  In addition, the interpretation expands disclosure requirements for both VIEs that are consolidated as well as VIEs from which the entity is the holder of a significant amount of the beneficial interests, but not the majority.  The disclosure requirements of this interpretation are effective for all financial statements issued after January 31, 2003.  The consolidation requirements of this interpretation have recently been deferred and are now effective for all periods ending no later than March 15, 2004.  Because the Company believes it has no variable interest entities, it does not expect that the adoption of this new standard will have an effect on the consolidated financial position or results of operations. 

In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149 ("SFAS 149"), "Amendment of Statement 133 on Derivative Instruments and Hedging Activities."  SFAS 149 amends Statement of Financial Accounting Standards No. 133 to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and requires that contracts with similar characteristics be accounted for on a comparable basis.  The provisions of SFAS 149 are effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003.  SFAS 149 has no material effect on the Company's consolidated financial statements as of or for the period ended November 30, 2003. 

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 ("SFAS 150"), "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity."  SFAS 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity.  The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003.  SFAS 150 has no material effect on the Company's consolidated financial statements as of or for the period ended November 30, 2003. 

Stock-based Compensation Plans
The Company follows Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related Interpretations, in accounting for its stock-based compensation plans and has elected to continue to use the intrinsic value-based method to account for stock option grants.  The Company adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation - - Transition and Disclosure", an amendment of Statement of Financial Accounting Standards No. 123 ("SFAS 123").  Accordingly, no compensation expense has been recognized for the Company's stock-based compensation plans.  Had the Company elected to recognize compensation expense based upon the fair value at the grant dates for awards under these plans, net loss and 

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loss per share would have been unchanged from amounts as presented because the Company has not granted any stock based compensation awards since FY01. 

(2)                Investment in ComCor-TV

On May 30, 2003, the Company invested $3,500,000 into CCTV to the terms of the agreements reached with COMCOR under which the Company plans to acquire 100% of the equity interests of CCTV through the issuance of common stock to COMCOR in exchange for COMCOR's equity interest in CCTV, and the exchange of its common stock for the outstanding stock of Moscow Broadband Communication Ltd ("Moscow Broadband") that it does not already own.  The Company has recorded this investment at its cost basis.  See Note 4 for additional discussion of the proposed transactions. 

(3)                Investment in Moscow Broadband Communication Ltd. 

The Company records its investment in Moscow Broadband using the equity method of accounting.  The Company's fiscal year ends on February 28/29, while Moscow Broadband has a December 31 year end.  As a result, the Company's equity in Moscow Broadband's results is reported on a two-month lag.  For the nine-month periods ended November 30, 2003 and 2002, the Company recorded losses of $488,000 and $512,000, respectively, which represent its 25% interest in Moscow Broadband's losses of $1,952,000 and $2,047,000 for the nine months ended September 30, 2003 and 2002, respectively.  These losses include Moscow Broadband's 50% equity interest in the losses of CCTV for the same periods.

At November 30, 2003, the carrying value of the Company's investment in Moscow Broadband was $1,483,000, and the Company's 25% equity interest in the net assets of Moscow Broadband was $1,864,000.  The $381,000 difference is attributed to a non-depreciable asset that was contributed to CCTV and will not result in the Company accreting the difference into its consolidated results of operations.

The following presents summarized financial information for Moscow Broadband as of September 30, 2003 and December 31, 2002 and its results of operations for the three and nine month periods ended September 30, 2003 and 2002 (in thousands): 

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The following presents summarized financial information for CCTV as of September 30, 2003 and December 31, 2002 and for the three and nine month periods ended September 30, 2003 and 2002 (in thousands): 

 (4)           ComCor-TV and Moscow Broadband Transactions 

In May 2003, the Company entered into agreements with COMCOR pursuant to which the Company expects to acquire control over 100% of the equity ownership of CCTV through (i) the purchase of CCTV equity held and to be acquired by COMCOR and (ii) the acquisition of the 75% of Moscow Broadband which the Company had not previously owned.  The agreements with COMCOR call for the Company to issue 4,220,879 shares of its common stock to COMCOR in exchange for the equity of CCTV to be held by COMCOR, including the equity of CCTV to be acquired by COMCOR in exchange for the extinguishment of approximately $1,380,500 of amounts owed or expected to be owed to COMCOR from CCTV. On October 27, 2003, the Company's stockholders approved the issuance of the shares of the Company's common stock to effect the transactions, and in December 2003, the Ministry of the Russian Federation on Anti-monopoly Policy granted its approval of the transaction.  COMCOR is presently awaiting approval to allow it to directly own shares of the Company's stock, after which, if received, the company expects to be able to complete the acquisition within a matter of days. 

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In connection with the COMCOR agreements, the Company made a $3.5 million investment into CCTV on May 30, 2003 and upon closing the agreements, it will be committed to making; i) a $1.0 million investment in CCTV within 20 days of the closing of the acquisition of the CCTV shares; and ii) a $1.5 million investment into CCTV at the earlier of the closing of a rights offering or August 31, 2004.  The COMCOR agreements also provide for an additional  $5,829,000 of capital contributions to CCTV from the Company prior to March 31, 2005. If such contributions are not made, then the Company will be obligated to issue up to 477,994 additional shares of its common stock to COMCOR. 

Pursuant to agreements signed effective April 1, 2003, COMCOR also agreed to eliminate the fee it charged CCTV for transportation network services from CCTV's utilization of the Moscow Fiber Optic Network that had been charged at the rate of 10% of CCTV's television service revenue. COMCOR also agreed to limit CCTV's payment obligations for the lease of secondary node switching stations to the lesser of i) $350 per secondary node per month as invoiced by COMCOR and ii) 20% of CCTV's television service revenues, calculated on a cumulative basis beginning January 1, 2003. At September 30, 2003, CCTV was utilizing 225 of COMCOR's secondary nodes.  To make this existing network more cost efficient, CCTV plans to reduce the use of up to 37 of these nodes within the next few months.  CCTV also plans to lease additional secondary nodes from COMCOR as further buildout of its access network occurs. 

Concurrent with the closing of the proposed acquisition of CCTV equity from COMCOR, the Company intends to acquire the 75% of the MBC equity that it does not currently own in exchange for 2,250,000 shares of Company common stock. In addition to the planned $1.0 million cash investment into CCTV to be made after the closing of the transactions, to partially satisfy its additional funding requirements discussed above,  the Company also intends to contribute approximately $1,250,000 to CCTV, which is comprised of (i) the contribution of Moscow Broadband's loans and advances to CCTV; (ii) 4,402 shares of the stock of the Institute for Automated Systems; and (iii) the extinguishment of a $138,144 liability of CCTV through the issuance of 33,427 shares of the Company's common stock. Such contributions would reduce the number of shares of the Company's common stock that the Company would be obligated to issue to COMCOR, in the absence of any other qualifying contributions made by the Company to CCTV, from 477,994 to 374,941. The agreements further call for the Company to maintain the right to name four of the seven members of the Company's Board of Directors and for COMCOR to name the remaining three pursuant to the terms of a Voting Agreement to be entered into upon the closing of the transactions among COMCOR, Oliver R. Grace, Jr., the Company's President, and Francis E. Baker, the Company's Chairman, to support the continuation of the Company's control over the corporate governance of the Company for an 18-month period. 

(5)           Mortgage Loan  

In June 2003, Andersen Land Corp. ("Andersen Land"), a wholly-owned subsidiary of the Company formerly known as The J.M. Ney Company, entered into a seven-year $2.0 million mortgage agreement secured by Andersen Land's real estate property and an assignment of rents from the lease agreement entered into with the buyer of JM Ney's operating assets.  Andersen Land provided the proceeds of this loan to the Company to assist the Company in meeting its cash flow obligations. 

(6)           Income Taxes

Income tax benefit represents an estimate of the effective income tax rate for the current fiscal year after considering valuation allowances with respect to the Company's ability to realize a tax benefit from its equity in the losses of Moscow Broadband and the extent of the Company's ability to utilize current year losses to recover previously paid income taxes.

(7)           Loss Per Share

Loss per share is computed based on the weighted average number of shares of common stock and common stock equivalents outstanding.  Diluted 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 three and nine month periods ended November 30, 2003 and 2002, the effect of the assumed conversion of the Company's dilutive securities had an antidilutive effect on the Company's per share results from continuing operations. 

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Item. 2  Management's Discussion and Analysis of Financial Condition and Results of Operations

The accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the MD&A in the Company's Report on Form 10-K for the year ended February 28, 2003. 

Overview

The Company is a holding company which holds a 25% ownership interest in Moscow Broadband which in turn holds 50% voting control over CCTV, a Russian company that delivers cable television, high speed data transmission and Internet services to its customers in Moscow, Russia.  CCTV is a start-up business that is currently expanding its network and attempting to increase its customer base.

In May 2003, the Company entered into agreements with COMCOR, that, upon closing, will result in CCTV becoming a wholly-owned subsidiary of the Company.  These agreements call for the issuance of 6,470,879 shares of the Company's common stock in exchange for the equity interest of CCTV to be held by COMCOR, and for the 75% of Moscow Broadband not presently owned by the Company.  On October 27, 2003, the Company obtained the approval of the Company's stockholders to issue shares of its common stock to effect the transactions.  In addition, the Company will be contingently liable to issue up to an additional 477,994 shares of its common stock if certain financing commitments are not made.

The Company also has a trading portfolio of equity investments of domestic and foreign-based companies, which at November 30, 2003 was valued at $3,841,000.

From 1991 until March 22, 2002, the Company owned and operated JM Ney as its primary operating subsidiary.  The operating assets of JM Ney were sold during the first quarter of FY03 and the net current assets of JM Ney which were not sold were substantially liquidated.  The Company retained ownership of JM Ney's facility which it leases to the buyer of JM Ney's operating assets under terms of an eight-year lease which was negotiated in connection with the sale of JM Ney's net assets.

Due to the proposed acquisition of CCTV, and the sale of JM Ney, the following discussion and analysis of the results of operations and the financial condition of the Company is not indicative of the Company's expectations of its future results of operations.

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Critical Accounting Policies and Estimates

The MD&A discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  On an on-going basis, management evaluates its estimates and judgments, including those related to bad debts, investments, income taxes, financing operations, retirement benefits, and contingencies and litigation.  Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions. 

Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:   

Deferred Tax Assets

The Company records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. The Company considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance.  When the Company determines that it may not be able to realize all or part of its net deferred tax assets, a valuation allowance to reduce the deferred tax assets to estimated recoverable amounts is charged to income in the period such determination is made.  Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, a reduction in the valuation allowance would increase income in the period such determination is made.

Investments in Moscow Broadband and CCTV
The Company records its investment in Moscow Broadband using the equity method which also requires that the carrying value of the investment be evaluated for impairment.   The Company records its investment in CCTV at cost until the closing of the transactions, at which time both investments will be included within the cost basis of CCTV as a consolidated subsidiary of the Company.  The ability for the Company to consummate the proposed transactions and the ability of CCTV to meet its obligations and to continue to grow its revenues will be determining factors in continuing impairment evaluations.  At this time, Company management believes that there should not be an impairment of these assets recorded as of November 30, 2003.

RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED NOVEMBER 30, 2003 VS. THREE AND NINE MONTHS ENDED NOVEMBER 30, 2002

For the nine months ended November 30, 2003 and 2002 the Company reported net loss as follows (in thousands except per share amounts):