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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period endedSeptember 30, 2006
 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: 0-16718
 Northland Cable Properties Seven Limited Partnership
 
 Washington
    
    91-1366564(State of Organization)
    
    (I.R.S. Employer Identification No.)
 101 Stewart Street, Suite 700, Seattle, Washington
    
    98065(Address of Principal Executive Offices)
    
    (Zip Code)
 
 
  þ o
  o o þ
  o þ




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TABLE OF CONTENTS  PART 1  FINANCIAL INFORMATIONITEM 1. Financial StatementsITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Continuing OperationsITEM 3. Quantitative and Qualitative Disclosures About Market RiskITEM 4. Controls and ProceduresPART II  OTHER INFORMATIONITEM 1 Legal proceedingsITEM 1A Risk FactorsITEM 2 Changes in securitiesITEM 3 Defaults upon senior securitiesITEM 4 Submission of matters to a vote of security holdersITEM 5 Other informationITEM 6 Exhibits and Reports on Form 8-KSIGNATURESEXHIBIT 31.(A)EXHIBIT 31.(B)EXHIBIT 32.(A)EXHIBIT 32.(B)    Table of Contents  
  
  
 September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCash
    
    $
    213,147
    
    
    $
    877,365Accounts receivable
    
    
    167,356
    
    
    
    230,728Due from affiliates
    
    
    62,804
    
    
    
    83,810Prepaid expenses
    
    
    146,356
    
    
    
    74,950System sale receivable
    
    
    1,776,027
    
    
    
    1,779,553Property and equipment, net of accumulated
depreciation of $11,585,226 and $10,477,977,
respectively
    
    
    6,585,952
    
    
    
    6,568,493Franchise agreements, net of accumulated
amortization of $9,995,974, respectively
    
    
    9,606,966
    
    
    
    9,606,966Loan fees and other intangibles, net of accumulated
amortization of $758,353 and $729,673, respectively
    
    
    95,597
    
    
    
    124,277Total assets
    
    $
    18,654,205
    
    
    $
    19,346,142LIABILITIES AND PARTNERS CAPITAL (DEFICIT)Accounts payable and accrued expenses
    
    $
    784,188
    
    
    $
    1,183,102Due to Managing General Partner and affiliates
    
    
    49,347
    
    
    
    46,643Deposits
    
    
    17,085
    
    
    
    16,335Subscriber prepayments
    
    
    166,967
    
    
    
    184,811Notes payable
    
    
    3,122,157
    
    
    
    3,827,998Total liabilities
    
    
    4,139,744
    
    
    
    5,258,889Partners capital (deficit):General Partners:Contributed capital, net
    
    
    (25,367
    )
    
    
    (25,367
    )Accumulated deficit
    
    
    (40,144
    )
    
    
    (44,421
    )(65,511
    )
    
    
    (69,788
    )Limited Partners:Contributed capital, net
    
    
    18,554,382
    
    
    
    18,554,844Accumulated deficit
    
    
    (3,974,410
    )
    
    
    (4,397,803
    )14,579,972
    
    
    
    14,157,041Total partners capital (deficit)
    
    
    14,514,461
    
    
    
    14,087,253Total liabilities and partners capital (deficit)
    
    $
    18,654,205
    
    
    $
    19,346,142




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For the nine months ended September 30,2006
    
    
    2005Service revenues
    
    $
    6,438,892
    
    
    $
    6,298,226Expenses:Cable system operations (including
$113,225 and $98,829 to affiliates in
2006 and 2005, respectively), excluding
depreciation and amortization shown below
    
    
    593,959
    
    
    
    587,923General and administrative (including
$648,125 and $654,324 to affiliates
in 2006 and 2005, respectively)
    
    
    1,777,582
    
    
    
    1,656,646Programming (including $3,727 and
$1,788 to affiliates in 2006 and 2005,
respectively)
    
    
    2,227,596
    
    
    
    2,052,218Depreciation
    
    
    1,128,693
    
    
    
    1,177,103Loss (gain) on disposal of assets
    
    
    1,225
    
    
    
    (36,692
    )5,729,055
    
    
    
    5,437,198Income from operations
    
    
    709,837
    
    
    
    861,028Other income (expense):Interest expense and amortization of loan fees
    
    
    (284,363
    )
    
    
    (258,308
    )Interest income and other, net
    
    
    2,196
    
    
    
    858(282,167
    )
    
    
    (257,450
    )Income from continuing operations
    
    $
    427,670
    
    
    $
    603,578Discontinued operations (note 3) Income from
operations of Brenham and Bay City systems, net
(including gain on sale of systems of
$12,388,296 in 2005)
    
    
    
    
    
    
    12,066,929Loss on sale of Washington Systems
    
    
    
    
    
    
    (312,971
    )Net income
    
    
    427,670
    
    
    
    12,357,536Allocation of net income:General Partners
    
    $
    4,277
    
    
    $
    123,575Limited Partners
    
    $
    423,393
    
    
    $
    12,233,961Income from continuing operations per limited
partnership unit (49,656 units):
    
    $
    9
    
    
    $
    12Income from discontinued operations per limited
partnership unit (49,656 units):
    
    $
    
    
    
    $
    234Net income per limited partnership unit:(49,656 units)
    
    $
    9
    
    
    $
    246




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For the three months ended September 30,2006
    
    
    2005Service revenues
    
    $
    2,150,525
    
    
    $
    2,063,527Expenses:Cable system operations (including
$28,734 and $34,698 to affiliates in
2006 and 2005, respectively), excluding
depreciation and amortization shown below
    
    
    203,659
    
    
    
    207,294General and administrative (including
$215,213 and $222,793 to affiliates
in 2006 and 2005, respectively)
    
    
    576,721
    
    
    
    580,161Programming (including $1,460 and
$734 to affiliates in 2006 and 2005,
respectively)
    
    
    788,317
    
    
    
    670,590Depreciation
    
    
    366,029
    
    
    
    395,139Loss (gain) on disposal of assets
    
    
    681
    
    
    
    (15,479
    )1,935,407
    
    
    
    1,837,705Income from operations
    
    
    215,118
    
    
    
    225,822Other income (expense):Interest expense and amortization of loan fees
    
    
    (92,424
    )
    
    
    (92,952
    )Interest income and other, net
    
    
    683
    
    
    
    590(91,741
    )
    
    
    (92,362
    )Income from continuing operations
    
    $
    123,377
    
    
    $
    133,460Discontinued operations (note 3)Income from operations of Brenham and Bay City
systems, net (including gain on sale of systems of
$5,134,467 in 2005)
    
    
    
    
    
    
    4,904,574Loss on sale of Washington Systems
    
    
    
    
    
    
    (312,971
    )Net income
    
    
    123,377
    
    
    
    4,725,063Allocation of net income:General Partners
    
    $
    1,234
    
    
    $
    47,251Limited Partners
    
    $
    122,143
    
    
    $
    4,677,812Income from continuing operations per limited
partnership unit (49,656 units):
    
    $
    2
    
    
    $
    3Income from discontinued operations per limited
partnership unit (49,656 units):
    
    $
    
    
    
    $
    92Net income per limited partnership unit:(49,656 units)
    
    $
    2
    
    
    $
    94




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For the nine months ended September 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    427,670
    
    
    $
    12,357,536Adjustments to reconcile net income to
cash provided by operating activities:Depreciation
    
    
    1,128,693
    
    
    
    1,252,981Loan fee amortization
    
    
    28,680
    
    
    
    88,421Loss (gain) on sale of assets
    
    
    1,225
    
    
    
    (12,147,754
    )Other
    
    
    
    
    
    
    26,645(Increase) decrease in operating assets:Accounts receivable
    
    
    66,898
    
    
    
    101,502Due from affiliates
    
    
    21,006
    
    
    
    (16,094
    )Prepaid expenses
    
    
    (71,406
    )
    
    
    20,846Increase (decrease) in operating liabilities:Accounts payable and accrued expenses
    
    
    (399,920
    )
    
    
    (684,122
    )Due to Managing General Partner and affiliates
    
    
    2,704
    
    
    
    (5,143
    )Deposits
    
    
    750
    
    
    
    2,699Subscriber prepayments
    
    
    (17,844
    )
    
    
    (17,703
    )Net cash provided by operating activities
    
    
    1,188,456
    
    
    
    979,814CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (1,188,270
    )
    
    
    (1,079,519
    )Proceeds from sale of systems
    
    
    
    
    
    
    15,214,680Proceeds from the sale of assets
    
    
    41,437
    
    
    
    26,171Proceeds from related party insurance fund
    
    
    
    
    
    
    24,242Net cash (used in) provided by investing activities
    
    
    (1,146,833
    )
    
    
    14,185,574CASH FLOWS FROM FINANCING ACTIVITIES:Principal payments on borrowings
    
    
    (705,841
    )
    
    
    (14,391,356
    )Loan fees
    
    
    
    
    
    
    (137,062
    )Net cash used in financing activities
    
    
    (705,841
    )
    
    
    (14,528,418
    )(DECREASE) INCREASE IN CASH
    
    
    (664,218
    )
    
    
    636,970CASH, beginning of period
    
    
    877,365
    
    
    
    65,547CASH, end of period
    
    $
    213,147
    
    
    $
    702,517SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    269,816
    
    
    $
    1,197,552




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NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
 (1) Basis of Presentation
   (2) Intangible Assets
   2006 (3 months)
    
    
    9,5592007
    
    
    38,2392008
    
    
    38,2392009
    
    
    9,560$
    95,597
 (3) System Sales




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For the nine months endedSeptember 30, 2005Service revenues
    
    $
    2,750,502Expenses:Operating (including $35,270 received from affiliates)
    
    
    244,957General and administrative (including $243,342 paid to
affiliates)
    
    
    779,764Programming (including $787 paid to affiliates)
    
    
    1,132,189Depreciation and amortization
    
    
    75,878Gain on disposal of assets
    
    
    (12,889,646
    )(10,656,858
    )Income from operations
    
    
    13,407,360Other expense:Interest expense and amortization of loan fees
    
    
    (622,727
    )Loss on extinguishment of debt
    
    
    (717,704
    )Income from operations of
Brenham and Bay City systems, net
    
    $
    12,066,929




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For the three months endedSeptember 30, 2005Service revenues
    
    $
    193,680Expenses:Operating (including $8,982 received from affiliates)
    
    
    55,496General and administrative (including $14,215 paid to
affiliates)
    
    
    147,469Programming (including $204 received from affiliates)
    
    
    82,614Gain on disposal of assets
    
    
    (5,349,397
    )(5,063,818
    )Income from operations
    
    
    5,257,498Other expense:Interest expense and amortization of loan fees
    
    
    (45,189
    )Loss on extinguishment of debt
    
    
    (307,735
    )Income from
operations of Brenham and Bay City systems, net
    
    $
    4,904,574
    (4) Notes Payable




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2006 (3 months)
    
    
    235,8722007
    
    
    1,165,6332008
    
    
    1,387,5542009
    
    
    333,098$
    3,122,157
   (5) Litigation




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(6) Solicitation of Interest from Potential Purchasers




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PART I (continued)
 
 ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Continuing
Operations
 Results of Continuing Operations  Nine Months Ended September 30, 2006 and 2005
   
    
    $5,137,474 (80%) from basic and expanded services,
    
    $397,726 (6%) from premium services
    
    $63,213 (1%) from digital services
    
    $291,731 (5%) from high speed Internet services
    
    $245,839 (4%) from advertising
    
    $134,587 (2%) from late fees
    
    $168,322 (2 %) from other sources.




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Results of Continuing Operations  Three Months Ended September 30, 2006 and 2005
   
    
    $1,695,660 (79%) from basic and expanded services,
    
    $130,440 (6%) from premium services
    
    $20,592 (1%) from digital services
    
    $115,403 (5%) from high speed Internet services
    
    $86,620 (4%) from advertising
    
    $47,659 (2%) from late fees
    
    $54,151 (3 %) from other sources.




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Liquidity and Capital Resources
     Notes Payable




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2006 (3 months)
    
    
    235,8732007
    
    
    1,165,6332008
    
    
    1,387,5542009
    
    
    333,097$
    3,122,157
   System Sales




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Obligations and Commitments
  Payments Due By PeriodLess than 1
    
    1  3
    
    3  5
    
    More thanTotal
    
    year
    
    years
    
    years
    
    5 yearsNotes payable
    
    $
    3,122,157
    
    
    $
    1,110,097
    
    
    $
    2,012,060
    
    
    
    
    
    
    
    Minimum operating lease payments
    
    
    2,421
    
    
    
    1,677
    
    
    
    744
    
    
    
    
    
    
    
    Total
    
    $
    3,124,578
    
    
    $
    1,111,774
    
    
    $
    2,012,804
 (a)
    
    These contractual obligations do not include accounts payable and accrued liabilities,
which are expected to be paid in 2006.(b)
    
    The Partnership also rents utility poles in its operations. Amounts due under these
agreements are not included in the above minimum operating lease payments amounts as,
generally, pole rentals are cancelable on short notice. The Partnership does however
anticipate that such rentals will recur.(c)
    
    Note that obligations related to the Partnerships notes payable exclude interest
expense.
 Capital Expenditures
   Critical Accounting Policies
  Revenue Recognition
  Property and Equipment




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Intangible Assets
   Allocation of Interest Expense to Discontinued Operations
  
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
   
 ITEM 4. Controls and Procedures




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ITEM 1 Legal proceedings
     
 ITEM 1A Risk Factors
  
 ITEM 2 Changes in securities
  
 ITEM 3 Defaults upon senior securities
  
 ITEM 4 Submission of matters to a vote of security holders
  
 ITEM 5 Other information
  
 ITEM 6 Exhibits and Reports on Form 8-K
 (a)
    
    Exhibit Index
 31 (a).
    
    Certification of Chief Executive Officer of Northland
Communications Corporation, the Managing General Partner, dated November 14,
2006 pursuant to section 302 of the Sarbanes-Oxley Act31 (b).
    
    Certification of President (Principal Financial and Accounting
Officer) of Northland Communications Corporation, the Managing General Partner,
dated November 14, 2006 pursuant to section 302 of the Sarbanes-Oxley Act




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32 (a).
    
    Certification of Chief Executive Officer of Northland
Communications Corporation, the Managing General Partner, dated November 14,
2006 pursuant to section 906 of the Sarbanes-Oxley Act32 (b).
    
    Certification of President (Principal Financial and Accounting
Officer) of Northland Communications Corporation, the Managing General Partner, dated November 14,
2006 pursuant to section 906 of the Sarbanes-Oxley Act
 (b)
    
    Reports on Form 8-KForm 8-K filed September 20, 2006 regarding settlement of ongoing litigation.




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SIGNATURES
  NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
 
 SIGNATURES
    
    CAPACITIES
    
    DATE/S/ RICHARD I. CLARK

Richard I. Clark
    
    Executive Vice President, Treasurer and
Assistant Secretary
    
    11-14-06/S/ GARY S. JONES

Gary S. Jones
    
    President
    
    11-14-06