##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|  |  |                                                                                        
|  |  | For the quarterly period ended June 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 333-43157

NORTHLAND CABLE TELEVISION, INC.

(Exact name of registrant as specified in its charter)


|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|STATE OF WASHINGTON                            |  | 91-1311836                          
|                                               |  |                                     
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)

AND SUBSIDIARY GUARANTOR:

NORTHLAND CABLE NEWS, INC.

(Exact name of registrant as specified in its charter)


|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|STATE OF WASHINGTON                            |  | 91-1638891                          
|                                               |  |                                     
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)

|                                                  |  |           
|------------------------------------------------- |  | ----------
|101 STEWART STREET, SUITE 700
SEATTLE, WASHINGTON |  | 98101     
|                                                  |  |           
|(Address of principal executive offices)          |  | (Zip Code)

Registrants telephone number, including area code: (206) 621-1351

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 o

Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.)

Yes o   No x





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TABLE OF CONTENTS



|                                        |                                                                                               |  |  |  |  |  |  | 
|--------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART 1  FINANCIAL INFORMATION         
|                                        | ITEM 1. Financial Statements                                                                 
|NOTES TO UNAUDITED FINANCIAL STATEMENTS
|                                        | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                        | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                        | ITEM 4. CONTROLS AND PROCEDURES                                                              
|                                        | ITEM 1 Legal proceedings                                                                     
|                                        | 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                                                      
|SIGNATURES                             
|EXHIBIT 31.(A)                         
|EXHIBIT 31.(B)                         
|EXHIBIT 32.(A)                         
|EXHIBIT 32.(B)                         



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##### Table of Contents






PART 1  FINANCIAL INFORMATION




ITEM 1. Financial Statements

NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS  (UNAUDITED)

|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |             |             |             |  
|---------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | --------------------------- | ----------- | ---------- | ----------- | ------------ | ----------- | ----------- | ----------- | -
|                                                                                                     |                                                                                                                                         |                                                 |                             |             | June 30,   |             | December 31,
|                                                                                                     |                                                                                                                                         |                                                 |                             |             | 2003       |             | 2002        
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |             
|ASSETS                                                                                               |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|Current Assets:                                                                                      |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     | Cash and cash equivalents                                                                                                               |                                                 | $                           | 2,846,102   |            |             | $            | 1,538,002   |            
|                                                                                                     | Due from Parent and affiliates                                                                                                          |                                                 |                             | 1,196,261   |            |             |              | 796,464     |            
|                                                                                                     | System sale receivable                                                                                                                  |                                                 |                             | 4,096,437   |            |             |              |            |            
|                                                                                                     | Accounts receivable                                                                                                                     |                                                 |                             | 1,582,432   |            |             |              | 2,047,900   |            
|                                                                                                     | Prepaid expenses                                                                                                                        |                                                 |                             | 346,353     |            |             |              | 392,271     |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     |                                                                                                                                         | Total current assets                            |                             |             | 10,067,585 |             |              |             | 4,774,637   |            
|Investment in Cable Television Properties:                                                           |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|Property and equipment, net of accumulated
depreciation of $56,549,383 and $52,255,286,
respectively |                                                                                                                                         |                                                 | 42,524,173                  |             |            |             | 44,152,208   |            
|Franchise agreements, net of accumulated amortization
of $38,923,291                                 |                                                                                                                                         |                                                 | 39,488,670                  |             |            |             | 39,487,137   |            
|Goodwill, net of accumulated amortization
of $2,407,104                                              |                                                                                                                                         |                                                 | 3,937,329                   |             |            |             | 3,937,329    |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     |                                                                                                                                         | Total investment in cable television properties |                             |             | 85,950,172 |             |              |             | 87,576,674  |            
|Loan fees, net of accumulated amortization of $2,307,477
and $2,650,564, respectively                |                                                                                                                                         |                                                 | 1,911,109                   |             |            |             | 3,188,581    |            
|Other intangible assets, net of accumulated
amortization of $3,176,595 and $3,140,381, respectively  |                                                                                                                                         |                                                 | 100,395                     |             |            |             | 136,608      |            
|Assets of discontinued operations                                                                    |                                                                                                                                         |                                                 |                            |             |            |             | 25,504,853   |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     |                                                                                                                                         | Total assets                                    |                             | $           | 98,029,261 |             |              | $           | 121,181,353 |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                                |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|Current Liabilities:                                                                                 |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     | Accounts payable                                                                                                                        |                                                 | $                           | 51,579      |            |             | $            | 528,645     |            
|                                                                                                     | Accrued expenses                                                                                                                        |                                                 |                             | 4,924,740   |            |             |              | 4,705,722   |            
|                                                                                                     | Converter deposits                                                                                                                      |                                                 |                             | 112,375     |            |             |              | 116,027     |            
|                                                                                                     | Subscriber prepayments                                                                                                                  |                                                 |                             | 1,316,489   |            |             |              | 1,629,235   |            
|                                                                                                     | Due to affiliates                                                                                                                       |                                                 |                             | 281,390     |            |             |              | 228,220     |            
|                                                                                                     | Current portion of notes payable                                                                                                        |                                                 |                             | 4,375,000   |            |             |              | 2,775,920   |            
|                                                                                                     | Interest rate swap agreements                                                                                                           |                                                 |                             |            |            |             |              | 120,377     |            
|                                                                                                     | Liabilities of discontinued operations                                                                                                  |                                                 |                             |            |            |             |              | 1,443,610   |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     |                                                                                                                                         |                                                 | Total current liabilities   |             |            | 11,061,573  |              |             |             | 11,547,756  |  
|Notes payable, net of current portion                                                                |                                                                                                                                         |                                                 | 111,851,534                 |             |            |             | 165,255,262  |            
|Deferred tax liabilities, net of current portion                                                     |                                                                                                                                         |                                                 | 147,964                     |             |            |             |             |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     |                                                                                                                                         |                                                 | Total liabilities           |             |            | 123,061,071 |              |             |             | 176,803,018 |  
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|Shareholders Deficit:                                                                               |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     | Common stock (par value $1.00 per share, authorized
50,000 shares; 10,000 shares issued and outstanding)
and additional paid-in capital |                                                 |                             | 12,359,377  |            |             |              | 12,359,377  |            
|                                                                                                     | Accumulated deficit                                                                                                                     |                                                 |                             | (37,391,187 | )          |             |              | (67,981,042 | )          
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|                                                                                                     |                                                                                                                                         |                                                 | Total shareholders deficit |             |            | (25,031,810 | )            |             |             | (55,621,665 | )
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            
|Total liabilities and shareholders deficit                                                          |                                                                                                                                         | $                                               | 98,029,261                  |             |            | $           | 121,181,353  |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |            |             |              |            

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





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##### Table of Contents



NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME  (UNAUDITED)

|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |           |            |          |            |  
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ---------- | --------------------------------- | ---------- | --------- | ---------- | -------- | ---------- | -
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            | For the six months ended June 30,
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                  
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            | 2003                              |            | 2002     
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|Service revenues                                                   |                                                                                                                                                                          | $                                                | 24,865,600                                                                                                                              |                          |            | $                                 | 24,477,679 |          
|Expenses:                                                          |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|                                                                   | Cable system operations (including
$160,203 and $120,190, net paid to affiliates
in 2003 and 2002, respectively), exclusive of
depreciation and amortization shown below |                                                  |                                                                                                                                         | 9,591,067                |            |                                   |            | 9,236,529 |           
|                                                                   | General and
administrative (including
$725,525 and $199,036 net paid to affiliates in 2003
and 2002, respectively)                                                       |                                                  |                                                                                                                                         | 4,384,132                |            |                                   |            | 3,567,932 |           
|                                                                   | Management fees paid to Parent                                                                                                                                           |                                                  |                                                                                                                                         | 1,243,613                |            |                                   |            | 1,223,883 |           
|                                                                   | Depreciation and amortization                                                                                                                                            |                                                  |                                                                                                                                         | 4,398,139                |            |                                   |            | 4,358,738 |           
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         | Total operating expenses |            |                                   | 19,616,951 |           |            |          | 18,387,082 |  
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|Income from operations                                             |                                                                                                                                                                          |                                                  | 5,248,649                                                                                                                               |                          |            |                                   | 6,090,597  |          
|Other income (expense):                                            |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|                                                                   |                                                                                                                                                                          | Interest expense                                 |                                                                                                                                         |                          | (5,656,256 | )                                 |            |           | (6,154,784 | )       
|                                                                   |                                                                                                                                                                          | Interest income and other, net                   |                                                                                                                                         |                          | 15,124     |                                   |            |           | 24,244     |         
|                                                                   |                                                                                                                                                                          | Unrealized gain on interest rate swap agreements |                                                                                                                                         |                          | 120,377    |                                   |            |           | 1,380,657  |         
|                                                                   |                                                                                                                                                                          | Loss on disposal of assets                       |                                                                                                                                         |                          | (22,628    | )                                 |            |           | (15,876    | )       
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|                                                                   |                                                                                                                                                                          |                                                  | (5,543,383                                                                                                                              | )                        |            |                                   | (4,765,759 | )        
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|(Loss) income from continuing operations before income
tax expense |                                                                                                                                                                          |                                                  | (294,734                                                                                                                                | )                        |            |                                   | 1,324,838  |          
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|                                                                   |                                                                                                                                                                          |                                                  | Income tax expense                                                                                                                      |                          |            | (157,774                          | )          |           |            |         |           
|(Loss) income from continuing operations                           |                                                                                                                                                                          |                                                  | (452,508                                                                                                                                | )                        |            |                                   | 1,324,838  |          
|Discontinued operations (note 4)                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|                                                                   |                                                                                                                                                                          |                                                  | Income (loss) from operations of Aiken and Port
Angeles Systems, net of tax (including gain on
sales of systems of $31,525,585 in 2003) |                          |            | 31,042,363                        |            |           |            | (565,988 | )         
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|Net income                                                         |                                                                                                                                                                          |                                                  | 30,589,855                                                                                                                              |                          |            |                                   | 758,850    |          
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|Other comprehensive loss:                                          |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|                                                                   |                                                                                                                                                                          |                                                  | Reclassification of accumulated other comprehensive
income to unrealized gain on interest rate swaps                                    |                          |            |                                  |            |           |            | (209,000 | )         
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         | Other comprehensive loss |            |                                   |           |           |            |          | (209,000   | )
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          
|Total comprehensive income                                         |                                                                                                                                                                          | $                                                | 30,589,855                                                                                                                              |                          |            | $                                 | 549,850    |          
|                                                                   |                                                                                                                                                                          |                                                  |                                                                                                                                         |                          |            |                                   |            |          

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





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##### Table of Contents



NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland
Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME  (UNAUDITED)

|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |           |            |          |           |  
|--------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | ------------------------ | ---------- | ----------------------------------- | ---------- | --------- | ---------- | -------- | --------- | -
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            | For the three months ended June 30,
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                    
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            | 2003                                |            | 2002     
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|Service revenues                                                                                    |                                                                                                                                                                        | $                                                | 12,459,845                                                                                           |                          |            | $                                   | 12,344,368 |          
|Expenses:                                                                                           |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|                                                                                                    | Cable system operations (including
$97,728 and $68,970, net paid to affiliates
in 2003 and 2002, respectively), exclusive of
depreciation and amortization shown below |                                                  |                                                                                                      | 4,768,711                |            |                                     |            | 4,632,083 |           
|                                                                                                    | General and
administrative (including
$300,469 and $235,583 net paid to affiliates in 2003
and 2002, respectively)                                                     |                                                  |                                                                                                      | 2,227,032                |            |                                     |            | 1,896,755 |           
|                                                                                                    | Management fees paid to Parent                                                                                                                                         |                                                  |                                                                                                      | 623,324                  |            |                                     |            | 617,287   |           
|                                                                                                    | Depreciation and amortization                                                                                                                                          |                                                  |                                                                                                      | 2,220,883                |            |                                     |            | 2,189,345 |           
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      | Total operating expenses |            |                                     | 9,839,950  |           |            |          | 9,335,470 |  
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|Income from operations                                                                              |                                                                                                                                                                        |                                                  | 2,619,895                                                                                            |                          |            |                                     | 3,008,898  |          
|Other income (expense):                                                                             |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|                                                                                                    |                                                                                                                                                                        | Interest expense                                 |                                                                                                      |                          | (2,813,454 | )                                   |            |           | (3,020,545 | )       
|                                                                                                    |                                                                                                                                                                        | Interest income and other, net                   |                                                                                                      |                          | 7,845      |                                     |            |           | 19,418     |         
|                                                                                                    |                                                                                                                                                                        | Unrealized gain on interest rate swap agreements |                                                                                                      |                          |           |                                     |            |           | 412,482    |         
|                                                                                                    |                                                                                                                                                                        | Loss on disposal of assets                       |                                                                                                      |                          | (22,802    | )                                   |            |           | (10,052    | )       
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|                                                                                                    |                                                                                                                                                                        |                                                  | (2,828,411                                                                                           | )                        |            |                                     | (2,598,697 | )        
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|(Loss) income from continuing operations before income
tax expense                                  |                                                                                                                                                                        |                                                  | (208,516                                                                                             | )                        |            |                                     | 410,201    |          
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|                                                                                                    |                                                                                                                                                                        |                                                  | Income tax expense                                                                                   |                          |            | (68,942                             | )          |           |            |         |          
|(Loss) income from continuing operations                                                            |                                                                                                                                                                        |                                                  | (277,458                                                                                             | )                        |            |                                     | 410,201    |          
|Discontinued operations (note 4)
Loss from operations of Aiken and Port
Angeles Systems, net of tax |                                                                                                                                                                        |                                                  |                                                                                                     |                          |            |                                     | (140,640   | )        
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|Net (loss) income                                                                                   |                                                                                                                                                                        |                                                  | (277,458                                                                                             | )                        |            |                                     | 269,561    |          
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|Other comprehensive loss:                                                                           |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|                                                                                                    |                                                                                                                                                                        |                                                  | Reclassification of accumulated other comprehensive
income to unrealized gain on interest rate swaps |                          |            |                                    |            |           |            | (105,000 | )        
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      | Other comprehensive loss |            |                                     |           |           |            |          | (105,000  | )
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          
|Total comprehensive (loss) income                                                                   |                                                                                                                                                                        | $                                                | (277,458                                                                                             | )                        |            | $                                   | 164,561    |          
|                                                                                                    |                                                                                                                                                                        |                                                  |                                                                                                      |                          |            |                                     |            |          

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





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##### Table of Contents



NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (UNAUDITED)

|                                                                              |                                                    |                                       |             |                                   |            |      |            |            |            |  
|----------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------- | ----------- | --------------------------------- | ---------- | ---- | ---------- | ---------- | ---------- | -
|                                                                              |                                                    |                                       |             | For the six months ended June 30,
|                                                                              |                                                    |                                       |             |                                  
|                                                                              |                                                    |                                       |             | 2003                              |            | 2002
|                                                                              |                                                    |                                       |             |                                   |            |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                         |                                                    |                                       |             |                                   |            |      |            |           
|Net income                                                                    |                                                    | $                                     | 30,589,855  |                                   |            | $    | 758,850    |           
|Adjustments to reconcile net income to
cash provided by operating activities: |                                                    |                                       |             |                                   |            |      |            |           
|                                                                              | Depreciation and amortization                      |                                       |             | 4,815,937                         |            |      |            | 5,298,394  |           
|                                                                              | Unrealized gain on interest rate swap agreements   |                                       |             | (120,377                          | )          |      |            | (1,380,657 | )         
|                                                                              | Amortization of loan costs                         |                                       |             | 281,707                           |            |      |            | 335,991    |           
|                                                                              | (Gain) loss on disposal of assets                  |                                       |             | (31,502,957                       | )          |      |            | 15,876     |           
|                                                                              | Deferred income taxes                              |                                       |             | 147,964                           |            |      |            |            |           
|                                                                              | (Increase) decrease in operating assets:           |                                       |             |                                   |            |      |            |            |           
|                                                                              |                                                    | Accounts receivable                   |             |                                   | 448,897    |      |            |            | (209,964   | )
|                                                                              |                                                    | Prepaid expenses                      |             |                                   | 44,917     |      |            |            | 157,723    |  
|                                                                              |                                                    | Due from Parent and affiliates        |             |                                   | (400,619   | )    |            |            | (15,788    | )
|                                                                              | Increase (decrease) in operating liabilities       |                                       |             |                                   |            |      |            |            |           
|                                                                              |                                                    | Accounts payable and accrued expenses |             |                                   | (1,785,723 | )    |            |            | (1,678,962 | )
|                                                                              |                                                    | Due to affiliates                     |             |                                   | 51,875     |      |            |            | 373,788    |  
|                                                                              |                                                    | Converter deposits                    |             |                                   | (3,652     | )    |            |            | (5,353     | )
|                                                                              |                                                    | Subscriber prepayments                |             |                                   | (312,746   | )    |            |            | 30,242     |  
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|Net cash provided by operating activities                                     |                                                    |                                       | 2,255,078   |                                   |            |      | 3,680,140  |           
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                         |                                                    |                                       |             |                                   |            |      |            |           
|Investment in cable television properties                                     |                                                    |                                       | (2,723,174  | )                                 |            |      | (3,623,858 | )         
|Proceeds from sale of cable system                                            |                                                    |                                       | 53,445,107  |                                   |            |      | 1,226,088  |           
|Proceeds from disposal of assets                                              |                                                    |                                       | 9,175       |                                   |            |      | 13,550     |           
|Franchises and other intangibles                                              |                                                    |                                       | (1,533      | )                                 |            |      | (9,423     | )         
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|Net cash provided by (used in) investing activities                           |                                                    |                                       | 50,729,575  |                                   |            |      | (2,393,643 | )         
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                         |                                                    |                                       |             |                                   |            |      |            |           
|Principal payments on borrowings                                              |                                                    |                                       | (51,804,648 | )                                 |            |      | (1,000,000 | )         
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|Net cash used in financing activities                                         |                                                    |                                       | (51,804,648 | )                                 |            |      | (1,000,000 | )         
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|INCREASE IN CASH                                                              |                                                    |                                       | 1,180,005   |                                   |            |      | 286,497    |           
|CASH, beginning of period                                                     |                                                    |                                       | 1,666,097   |                                   |            |      | 2,724,099  |           
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|CASH, end of period                                                           |                                                    | $                                     | 2,846,102   |                                   |            | $    | 3,010,596  |           
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                             |                                                    |                                       |             |                                   |            |      |            |           
|                                                                              | Cash paid during the period for interest           |                                       | $           | 6,174,032                         |            |      | $          | 8,268,429  |           
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           
|                                                                              | Cash paid during the period for state income taxes |                                       | $           | 9,810                             |            |      | $          | 4,881      |           
|                                                                              |                                                    |                                       |             |                                   |            |      |            |           

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





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NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY
(A wholly owned subsidiary of Northland Telecommunications Corporation)




NOTES TO UNAUDITED FINANCIAL STATEMENTS

June 30, 2003
(Unaudited)


(1)  Basis of Presentation

Interim Financial Reporting

These unaudited condensed consolidated financial statements are being
filed in conformity with Rule 10-01 of Regulation S-X regarding interim
financial statement disclosures and do not contain all of the necessary
footnote disclosures required for a fair presentation of the consolidated
balance sheets, statements of operations and comprehensive income and
statements of cash flows in conformity with accounting principles
generally accepted in the United States of America. However, in the
opinion of management, this data includes all adjustments, consisting only
of normal recurring accruals, necessary to present fairly the Companys
consolidated financial position at June 30, 2003, its consolidated
statements of operations and comprehensive income for the six and three
months ended June 30, 2003 and 2002 and its consolidated statements of
cash flows for the six months ended June 30, 2003 and 2002. Results of
operations for these periods are not necessarily indicative of results to
be expected for the full year. These financial statements and notes
should be read in conjunction with the Companys Annual Report on Form
10-K for the year ended December 31, 2002.

On March 11, 2003 and March 31, 2003, the Company sold the operating
assets and franchise rights of its cable systems in and around Port
Angeles, Washington and Aiken, South Carolina, respectively. The
accompanying financial statements have been restated to report the
discontinued operations of the Company, effected for this sale.

Effective January 1, 2003, the Company adopted SFAS No. 143, Accounting
for Asset Retirement Obligations, (SFAS No. 143) which addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long lived assets and associated asset retirement
obligations (ARO). Under the scope of this pronouncement, the Company
has ARO associated with the removal of equipment from poles and headend
sites that are leased from third parties. Based on managements analyses,
the Company has concluded that for the reasons mentioned below, it is not
able to reasonably estimate the fair values of the ARO. First to operate
the cable television network, the Company will always need to have
equipment deployed at these poles and headend sites. Additionally, the
Company has not historically incurred any ARO and, given the length of
time in the future when any potential obligations might exist, management
believes that estimating any probability at this time is not practicable.
As a result, upon adoption of SFAS No. 143 the Company did not record any
ARO associated with the obligation to remove the equipment.

(2)  Intangible Assets

In accordance with the provisions of SFAS No. 142, Goodwill and Other
Intangible Assets, the Company does not amortize goodwill or any other
intangible assets determined to have indefinite lives. The Company has
determined that its franchises meet the definition of indefinite lived
assets. The Company tests these assets for impairment on an annual basis
during the fourth quarter, or on an interim basis if an event occurs or
circumstances change that would reduce the fair value of a reporting unit
below its carrying value or if the fair value of intangible assets with
indefinite lives falls below their carrying value on an annual basis. The
book value of the Companys intangible assets, effecting for the sale of
the Aiken System and the Port Angeles System described in note 4, is
presented in the following table:





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##### Table of Contents



|                                    |                         |   |               |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |            | 
|----------------------------------- | ----------------------- | - | ------------- | ---------- | ----------------- | - | ----------- | ----------- | -------- | - | ------------ | ---------- | -------- | - | ---------- | ---------- |  | - | ----------- | ----------- | - | - | ---------- | ---------- | 
|                                    |                         |   | June 30, 2003 |            | December 31, 2002
|                                    |                         |   |               |            |                  
|                                    |                         |   | Gross         |            | Accumulated       |   | Net         |             | Gross    |   | Accumulated  |            | Net     
|                                    |                         |   | Carrying      |            | Amortization      |   | Carrying    |             | Carrying |   | Amortization |            | Carrying
|                                    |                         |   | Amount        |            |                   |   | Amount      |             | Amount   |   |              |            | Amount  
|                                    |                         |   |               |            |                   |   |             |             |          |   |              |            |         
|Indefinite-lived
intangible assets: |                         |   |               |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           
|                                    | Franchises              |   | $             | 78,411,961 |                   |   | $           | (38,923,291 | )        |   | $            | 39,488,670 |          |   | $          | 78,410,428 |  |   | $           | (38,923,291 | ) |   | $          | 39,487,137 | 
|                                    | Goodwill                |   |               | 6,344,433  |                   |   |             | (2,407,104  | )        |   |              | 3,937,329  |          |   |            | 6,344,433  |  |   |             | (2,407,104  | ) |   |            | 3,937,329  | 
|                                    |                         |   |               |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           
|                                    |                         |   | 84,756,394    |            |                   |   | (41,330,395 | )           |          |   | 43,425,999   |            |          |   | 84,754,861 |            |  |   | (41,330,395 | )           |   |   | 43,424,466 |           
|Definite-lived
intangible assets:   |                         |   |               |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           
|                                    | Loan fees               |   |               | 4,218,586  |                   |   |             | (2,307,477  | )        |   |              | 1,911,109  |          |   |            | 5,839,145  |  |   |             | (2,650,564  | ) |   |            | 3,188,581  | 
|                                    | Other intangible assets |   |               | 3,276,990  |                   |   |             | (3,176,595  | )        |   |              | 100,395    |          |   |            | 3,276,989  |  |   |             | (3,140,381  | ) |   |            | 136,608    | 
|                                    |                         |   |               |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           
|                                    |                         | $ | 92,251,970    |            |                   | $ | (46,814,467 | )           |          | $ | 45,437,503   |            |          | $ | 93,870,995 |            |  | $ | (47,121,340 | )           |   | $ | 46,749,655 |           
|                                    |                         |   |               |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           

Amortization of loan fees and other intangibles for each of the next five
years is expected to be approximately as follows:

|     |  |   |           | 
|---- |  | - | --------- | 
|2003 |  | $ | 251,000   | 
|2004 |  |   | 468,000   | 
|2005 |  |   | 468,000   | 
|2006 |  |   | 462,000   | 
|2007 |  |   | 362,000   | 
|     |  |   |           | 
|     |  | $ | 2,011,000 | 
|     |  |   |           | 

(3)  Revised Senior Credit Facility

In August of 2000, the Company refinanced its existing senior bank
indebtedness. The original indebtedness was repaid with borrowings
under the Revised Senior Credit Facility. Amounts outstanding under
the Revised Senior Credit Facility mature on September 30, 2007. The
Revised Senior Credit Facility is collateralized by a first lien
position on all present and future assets and stock of the Company.
Interest rates vary based on certain financial covenants; currently
3.35%. Graduated principal and interest payments are due quarterly,
beginning September 30, 2003, until maturity on September 30, 2007.
The estimated fair value of the revolving credit and term loan facility
is equal to its carrying value because of its variable interest rate
nature.

Under the Revised Senior Credit
Facility, the Company has
agreed to restrictive covenants which require the maintenance of certain
ratios, including a Pro Forma Debt Service ratio of not less than 1.25 to
1.0 and a Leverage Ratio of no greater than 6.00 to 1.0, among other
restrictions. The Company submits quarterly debt compliance reports to
its creditor under this arrangement. As of June 30, 2003, the Company
was in compliance with the terms of the loan agreement.

As of the date of this filing, the
balance under the Revised Senior Credit Facility is
$16,226,534, and applicable interest rates are as follows: $14,851,534
at a LIBOR based interest rate of 3.35%, $875,000 at a LIBOR based
interest rate of 3.35% and $500,000 at a LIBOR based rate of 3.28%.
These interest rates expire in September of 2003, at which time new rates
will be established. The above rates also include a margin paid to the
lender based on overall leverage, and may increase or decrease as the
Companys leverage fluctuates.





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##### Table of Contents



(4)  System Sales

On March 11, 2003, the Company sold the operating assets and
franchise rights of its cable system in and around the community of Port
Angeles, Washington (the Port Angeles System). The Port Angeles System
was sold at a price of approximately $11,375,000 of which the Company
received approximately $10,800,000 at closing. The sales price was
adjusted at closing for the proration of certain revenues and expenses
and approximately $575,000 is being held in escrow and will be released
to the Company one year from the closing of the transaction, subject to
general representations and warranties. Historically, the Company has
entered into similarly structured transactions, and collected the amount
held in escrow. Substantially all of the proceeds were used to pay down
amounts outstanding under the Companys Senior Credit Facility.

On March 31, 2003, the Company sold the operating assets and franchise
rights of its cable system in and around the community of Aiken, South
Carolina (the Aiken System). The Aiken System was sold at a price of
approximately $46.3 million of which the Company received approximately
$42.6 million at closing. The sales price was adjusted at closing for the
proration of certain revenues and expenses and approximately $3.7 million
is being held in escrow and will be released to the Company one year from
the closing of the transaction, subject to general representations and
warranties. Historically, the Company has entered into similarly
structured transactions, and collected the amount held in escrow.
Substantially all of the proceeds were used to pay down amounts
outstanding under the Companys Senior Credit Facility.

The sales were made pursuant to offers by separate, independent third
parties. Based on the offers made, management determined that acceptance
of the offers would be in the best economic interest of the Company. The
sales were not a result of declining or deteriorating operations nor was
it necessary to create liquidity or reduce outstanding debt. It is the
opinion of management that the Company could have continued existing
operations and met all obligations as they became due.

The assets and liabilities attributable to the Aiken System and the Port
Angeles System as of December 31, 2002 have been reported as assets and
liabilities from discontinued operations in the accompanying balance
sheet, and consist of the following:

|                                                                       |                   |   |                   |            | 
|---------------------------------------------------------------------- | ----------------- | - | ----------------- | ---------- | 
|                                                                       |                   |   | As of            
|                                                                       |                   |   | December 31, 2002
|                                                                       |                   |   |                  
|Cash and cash equivalents                                              |                   | $ | 128,095           |           
|Accounts receivable                                                    |                   |   | 636,648           |           
|Prepaid expenses                                                       |                   |   | 65,139            |           
|Property and equipment, net of accumulated
depreciation of $10,905,201 |                   |   | 10,768,828        |           
|Franchise agreements (net of accumulated
amortization of $9,356,640)   |                   |   | 13,906,143        |           
|                                                                       |                   |   |                   |           
|                                                                       | Total assets      |   | $                 | 25,504,853 | 
|                                                                       |                   |   |                   |           
|Accounts payable                                                       |                   |   | 122,112           |           
|Accrued expenses                                                       |                   |   | 820,168           |           
|Converter deposits                                                     |                   |   | 9,152             |           
|Subscriber prepayments                                                 |                   |   | 492,178           |           
|                                                                       |                   |   |                   |           
|                                                                       | Total liabilities |   | $                 | 1,443,610  | 
|                                                                       |                   |   |                   |           

In addition, the revenue, expenses and other items attributable to the
operations of the Aiken System and the Port Angeles system during the
periods presented in this filing have been reported as discontinued
operations in the accompanying statements of operations and comprehensive
income, and include the following:





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##### Table of Contents



|                                                                                          |                                                                                                                    |   |                                   |            |      |   |           |            |  
|----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | - | --------------------------------- | ---------- | ---- | - | --------- | ---------- | -
|                                                                                          |                                                                                                                    |   | For the six months ended June 30,
|                                                                                          |                                                                                                                    |   |                                  
|                                                                                          |                                                                                                                    |   | 2003                              |            | 2002
|                                                                                          |                                                                                                                    |   |                                   |            |     
|Service Revenues                                                                          |                                                                                                                    | $ | 3,079,389                         |            |      | $ | 6,219,391 |           
|Expenses:                                                                                 |                                                                                                                    |   |                                   |            |      |   |           |           
|                                                                                          | Cable system operations (including
$6,289 and $40,931, net paid to
affiliates in 2003 and 2002, respectively)      |   |                                   | 1,205,573  |      |   |           | 2,296,138  |  
|                                                                                          | General and administrative (including
$152,093 and $12,932, net paid to
affiliates in 2003 and 2002, respectively) |   |                                   | 573,781    |      |   |           | 951,432    |  
|                                                                                          | Management fees paid to Parent                                                                                     |   |                                   | 153,637    |      |   |           | 310,970    |  
|                                                                                          | Depreciation and amortization                                                                                      |   |                                   | 417,798    |      |   |           | 939,656    |  
|                                                                                          |                                                                                                                    |   |                                   |            |      |   |           |           
|                                                                                          |                                                                                                                    |   | 2,350,789                         |            |      |   | 4,498,196 |           
|                                                                                          |                                                                                                                    |   |                                   |            |      |   |           |           
|Income from operations                                                                    |                                                                                                                    |   | 728,600                           |            |      |   | 1,721,195 |           
|Other income (expense):                                                                   |                                                                                                                    |   |                                   |            |      |   |           |           
|                                                                                          | Interest expense                                                                                                   |   |                                   | (711,822   | )    |   |           | (2,287,183 | )
|                                                                                          | Gain on sale of systems                                                                                            |   |                                   | 31,525,585 |      |   |           |           |  
|                                                                                          |                                                                                                                    |   |                                   |            |      |   |           |           
|Income (loss) from operation of Aiken and Port
Angeles Systems, before income tax expense |                                                                                                                    |   | 31,542,363                        |            |      |   | (565,988  | )         
|Income tax expense                                                                        |                                                                                                                    |   | (500,000                          | )          |      |   |          |           
|                                                                                          |                                                                                                                    |   |                                   |            |      |   |           |           
|Income (loss) from operations of Aiken and Port
Angeles Systems, net                      |                                                                                                                    | $ | 31,042,363                        |            |      | $ | (565,988  | )         
|                                                                                          |                                                                                                                    |   |                                   |            |      |   |           |           

|                                                            |                                                                        |   |                      |            |  
|----------------------------------------------------------- | ---------------------------------------------------------------------- | - | -------------------- | ---------- | -
|                                                            |                                                                        |   | For the three months
|                                                            |                                                                        |   | ended June 30, 2002 
|                                                            |                                                                        |   |                     
|Service Revenues                                            |                                                                        | $ | 3,137,892            |           
|Expenses:                                                   |                                                                        |   |                      |           
|                                                            | Cable system operations (including
$19,988, net paid to affiliates)    |   |                      | 1,155,742  |  
|                                                            | General and administrative (including
$30,503, net paid to affiliates) |   |                      | 492,486    |  
|                                                            | Management fees paid to Parent                                         |   |                      | 156,895    |  
|                                                            | Depreciation and amortization                                          |   |                      | 472,294    |  
|                                                            |                                                                        |   |                      |           
|                                                            |                                                                        |   | 2,277,417            |           
|                                                            |                                                                        |   |                      |           
|Income from operations                                      |                                                                        |   | 860,475              |           
|Other income (expense):                                     |                                                                        |   |                      |           
|                                                            | Interest expense                                                       |   |                      | (1,001,115 | )
|                                                            |                                                                        |   |                      |           
|Loss from operations of Aiken and Port
Angeles Systems, net |                                                                        | $ | (140,640             | )         
|                                                            |                                                                        |   |                      |           





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##### Table of Contents



In accordance with EITF 87-24,
Allocation of Interest
Expense to Discontinued Operations, the Company allocated interest expense to
discontinued operations using the historic weighted average interest rate
applicable to the Revised Senior Credit Facility and approximately
$51.8 million in
principal payments, which were applied to the Revised Senior Credit Facility as a
result of the sale of the Aiken System and the Port Angeles System.





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##### Table of Contents



PART I (continued)




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Continuing Operations  Six Months Ended June 30, 2003 and 2002

Revenues totaled $24.9 million for the six months ended June 30, 2003, an
increase of approximately $400,000 or 2.0% over the same period in 2002.
Of these revenues, $17.1 million (69%) was derived from basic services,
$1.7 million (7%) from premium services, $3.2 million (13%) from expanded
basic services, $500,000 (2%) from digital services, $1.3 million (5%)
from advertising and $1.1 million (4%) from other sources.

Average monthly revenue per subscriber increased $2.02 or 4.5% from
$45.27 for the six months ended June 30, 2002 to $47.29 for the six
months ended June 30, 2003. This increase is primarily attributable to
rate increases implemented during the first quarter of 2003, increased
revenue from higher penetration of new product tiers and increases in
advertising revenue.

Cable system operation expenses increased approximately $400,000 or 4.3%
from $9.2 million to $9.6 million for the six months ended June 30, 2003.
Programming costs, which represent the primary component of cable system
operation expenses, increased $300,000 or 4.1% as a result of rate
increases by certain programming vendors as well as the launch of new
analog programming services and the launch of digital programming
services.

General and administrative expenses increased approximately $800,000 or
22.2% from $3.6 million to $4.4 million for the six months ended June 30,
2003. This increase is primarily attributable to increases in bad
debt, marketing and property tax expenses, and increases in corporate
overhead allocations by the Companys Parent. The corporate
overhead allocations had been reduced in
prior periods, to the extent that allocation of these costs would have
resulted in non-compliance with the Companys debt covenants. Corporate
overhead expenses for the quarter represents actual costs incurred by the
Companys parent for the period that are attributable to the operations
of the Company. The Company has no obligation or liability to its Parent
for past reductions in corporate overhead charges.

Management fees for the six months ended June 30, 2003 increased
approximately 1.6% over the same period in the previous year. Management
fees are calculated at 5.0% of gross revenues.

Depreciation and amortization expenses for the six months ended June 30,
2003 remained relatively constant with the same period in 2002.

Interest expense allocated to continuing operations decreased
approximately $500,000 or 8.1%, from $6.2 million to $5.7 million for
the six months ended June 30, 2003 due primarily to the fact that the
Company made prepayments of approximately $2 million on the Revised
Senior Credit Facility during the last half of 2002 and the Companys
effective interest rate applicable to the Revised Senior Credit
Facility decreased from 8.41% during the first half of
2002 to 4.33% during the same period in 2003. Average outstanding
indebtedness decreased $26.5 million from $170.9 million to $144.4
million for the six months ended June 30, 2002 and 2003, respectively,
due primarily to the fact that the proceeds from the sale of the Aiken
System and the Port Angeles System were used to pay down amounts
outstanding under the Companys revised Senior Credit Facility in March
of 2003.

In accordance with EITF 87-24,
Allocation of Interest
Expense to Discontinued Operations, the Company allocated interest expense to
discontinued operations using the historic weighted average interest rate
applicable to the Revised Senior Credit Facility and approximately
$51.8 million in
principal payments, which were applied to the Revised Senior Credit Facility as a
result of the sale of the Aiken System and the Port Angeles System.

The Company has elected not to designate its interest rate swap
agreements as hedges under SFAS No. 133. Interest rate swap agreements
in place as of December 31, 2002 expired during the first quarter of
2003, and the Company has elected not to enter into any new agreements.
Accordingly, the Company recorded a debit to eliminate the liability on
its balance sheet, and a corresponding credit in its statement of
operations of approximately $120,000.





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##### Table of Contents



Results of Continuing Operations  Three Months Ended June 30, 2003 and 2002

Revenues totaled $12.5 million for the three months ended June 30, 2003,
an increase of approximately $200,000 or 1.6% over the same period in
2002. Of these revenues, $8.6 million (69%) was derived from basic
services, $800,000 (6%) from premium services, $1.6 million (13%) from
expanded basic services, $300,000 (2%) from digital services, $700,000
(6%) from advertising and $500,000 (4%) from other sources.

Average monthly revenue per subscriber increased $1.70 or 3.7% from
$45.91 for the three months ended June 30, 2002 to $47.61 for the three
months ended June 30, 2003. This increase is primarily attributable to
rate increases implemented during the first quarter of 2003 and increased
revenue from higher penetration of new product tiers.

Cable system operation expenses increased approximately $200,000 or 4.3%
from $4.6 million to $4.8 million for the three months ended June 30,
2003. Programming costs, which represent the primary component of cable
system operation expenses, increased $100,000 or 2.3% as a result of rate
increases by certain programming vendors as well as the launch of new
analog programming services and the launch of digital programming
services.

General and administrative expenses increased approximately $300,000 or
15.8% from $1.9 million to $2.2 million for the three months ended June
30, 2003. This increase is primarily attributable to increases in bad
debt, marketing and property tax expenses, and increases in
corporate overhead allocations by the Companys Parent. The
corporate overhead allocations had been
reduced in prior periods, to the extent that allocation of these costs
would have resulted in non-compliance with the Companys debt covenants.
Corporate overhead expenses for the quarter represents actual costs
incurred by the Companys parent for the period that are attributable to
the operations of the Company. The Company has no obligation or
liability to its Parent for past reductions in corporate overhead
charges.

Management fees for the three months ended June 30, 2003 increased
approximately 1.0% over the same period in the previous year. Management
fees are calculated at 5.0% of gross revenues.

Depreciation and amortization expenses for the three months ended June
30, 2003 remained relatively constant with the same period in 2002.

Interest expense allocated to
continuing operations decreased approximately $200,000 or 6.7%, from $3.0
million to $2.8 million for the three months ended June 30, 2003 due
primarily to the fact that the Company made prepayments of
approximately $2 million on the Revised Senior Credit Facility during
the last half of 2002. In addition, the  Companys effective
interest rate applicable to the Revised Senior Credit Facility
decreased from 7.31% during the second quarter of 2002 to 3.44% for
the same period in 2003. Average outstanding indebtedness decreased
$54.5 million from $170.7 million to $116.2 million for the three
months ended June 30, 2002 and 2003, respectively, as the proceeds from
the sale of the Aiken System and the Port Angeles System were used to
pay down amounts outstanding under the Companys Revised Senior Credit
Facility in March of 2003.

In accordance with EITF 87-24,
Allocation of Interest
Expense to Discontinued Operations, the Company allocated interest expense to
discontinued operations using the historic weighted average interest rate
applicable to the Revised Senior Credit Facility and approximately
$51.8 million in
principal payments, which were applied to the Revised Senior Credit Facility as a
result of the sale of the Aiken System and the Port Angeles System.

The Company has elected not to designate its interest rate swap
agreements as hedges under SFAS No. 133. Interest rate swap agreements
in place as of December 31, 2002 expired during the first quarter of
2003, and the Company has elected not to enter into any new agreements.

Liquidity and Capital Resources

The cable television business generally requires substantial capital
for the construction, expansion and maintenance of the signal
distribution system. In addition, the Company has pursued a business
strategy, which includes selective acquisitions. The Company has
financed these expenditures through a combination of cash flow from
operations, borrowings under the revolving credit and term loan
facility provided by a variety of banks and the issuance of senior
subordinated notes. The Companys required principal payments for the
remainder of 2003 are approximately $1.75 million. The Company
anticipates that cash flow from operations will be sufficient to
service its debt over the next twelve month period.
The Company believes that cash flow from operations will be adequate to
meet the Companys long-term





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##### Table of Contents



liquidity requirements prior to the maturity of its long-term indebtedness, although no assurance can be
given in this regard.

Net cash provided by operating activities was $2.3 million for the six
months ended June 30, 2003. Adjustments to the $30.6 million net income
for the period to reconcile to net cash provided by operating
activities consisted primarily of a gain of $31.5 million related to
the sales of the Aiken System and the Port Angeles System, and
decreases in operating liabilities of approximately $2.1 million,
offset by $4.8 million of depreciation and amortization.

Net cash provided by investing activities was $50.7 million for the six
months ended June 30, 2003, and consisted primarily of $53.4 million of
proceeds from the sales of the Aiken System and the Port Angeles
System, offset by $2.7 million in capital expenditures.

Net cash used in financing activities consisted of $51.8 million in
principal prepayments on the Revised Senior Credit Facility, as a
result of the sale of the Aiken System and the Port Angeles System.

EBITDA decreased approximately $800,000 or 7.7%, from $10.4 million to
$9.6 million for the six months ended June 30, 2003, and EBITDA margin
decreased from 42.7% to 38.8%. The aforementioned increases in revenues
were offset by increased administrative overhead charges and operating
expenses as a result of rate increases by certain programming vendors and
the launch of new programming services, discussed above.

Free cash flow decreased $400,000, or 21.1%, from $1.9 million to $1.5
million for the six months ended June 30, 2003. This decrease is
attributable to the aforementioned decline in EBITDA, offset by declining
interest expense and capital expenditures.

EBITDA represents income from operations excluding the effect of
depreciation and amortization expense. EBITDA margin represents EBITDA
as a percentage of revenue. Free cash flow represents income from
operations, excluding the effects of depreciation and amortization, less
interest expense and capital expenditures. EBITDA and free cash flow are
commonly used to analyze companies on the basis of leverage and
liquidity. However, they are not measures determined under generally
accepted accounting principles, or GAAP, in the United States and may not
be comparable to similarly titled measures reported by other companies.
EBITDA and free cash flow should not be construed as a substitute for
operating income or as better measure of liquidity than cash flow from
operating activities, which are determined in accordance with GAAP. We
have presented EBITDA and free cash flow to provide additional
information with respect to our ability to meet future debt service,
capital expenditure and working capital requirements. A reconciliation
of net cash provided by operating activities to EBITDA and free cash flow
follows:

|                                                          |  |                          |            |      |  |  |            |  
|--------------------------------------------------------- |  | ------------------------ | ---------- | ---- |  |  | ---------- | -
|                                                          |  | For the six months ended
|                                                          |  | June 30,                
|                                                          |  |                         
|                                                          |  | 2003                     |            | 2002
|                                                          |  |                          |            |     
|Net cash provided by operating activities                 |  |                          | 2,255,078  |      |  |  | 3,680,140  |  
|Interest expense, excluding amortization
of loan fees     |  |                          | 5,435,975  |      |  |  | 5,927,501  |  
|Changes in certain assets and liabilities,
and other, net |  |                          | 1,955,735  |      |  |  | 841,694    |  
|                                                          |  |                          |            |      |  |  |            |  
|EBITDA                                                    |  |                          | 9,646,788  |      |  |  | 10,449,335 |  
|                                                          |  |                          |            |      |  |  |            |  
|Interest expense, excluding amortization
of loan fees     |  |                          | (5,435,795 | )    |  |  | (5,927,501 | )
|Capital expenditures                                      |  |                          | (2,723,174 | )    |  |  | (2,669,940 | )
|                                                          |  |                          |            |      |  |  |            |  
|Free cash flow                                            |  |                          | 1,487,819  |      |  |  | 1,851,894  |  
|                                                          |  |                          |            |      |  |  |            |  





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##### Table of Contents



Revised Senior Credit Facility

In August of 2000, the Company refinanced its existing senior bank
indebtedness. The original indebtedness was repaid with borrowings
under the Revised Senior Credit Facility. Amounts outstanding under
the Revised Senior Credit Facility mature on September 30, 2007. The
Revised Senior Credit Facility is collateralized by a first lien
position on all present and future assets and stock of the Company.
Interest rates vary based on certain financial covenants; currently
3.35% (weighted average). Graduated principal and interest payments
are due quarterly, beginning September 30, 2003, until maturity on
September 30, 2007. The estimated fair value of the revolving credit
and term loan facility is equal to its carrying value because of its
variable interest rate nature.

As of the date of this filing, the
balance under the Revised Senior Credit Facility is
$16,226,534, and applicable interest rates are as follows: $14,851,534
at a LIBOR based interest rate of 3.35%, $875,000 at a LIBOR based
interest rate of 3.35% and $500,000 at a LIBOR based rate of 3.28%.
These interest rates expire in September of 2003, at which time new rates
will be established. The above rates also include a margin paid to the
lender based on overall leverage, and may increase or decrease as the
Companys leverage fluctuates.

System Sale

On March 11, 2003, the Company sold the operating assets and franchise
rights of its cable system in and around the community of Port Angeles,
Washington (the Port Angeles System). The Port Angeles System was sold
at a price of approximately $11,375,000 of which the Company received
approximately $10,800,000 at closing. The sales price was adjusted at
closing for the proration of certain revenues and expenses and
approximately $575,000 is being held in escrow and will be released to
the Company one year from the closing of the transaction, subject to
general representations and warranties. Historically, the Company has
entered into similarly structured transactions, and collected on the
amount held in escrow. Substantially all of the proceeds were used to
pay down amounts outstanding under the Companys Senior Credit Facility.

On March 31, 2003, the Company sold the operating assets and franchise
rights of its cable system in and around the community of Aiken, South
Carolina (the Aiken System). The Aiken System was sold at a price of
approximately $46.3 million of which the Company received approximately
$42.6 million at closing. The sales price was adjusted at closing for the
proration of certain revenues and expenses and approximately $3.7 million
is being held in escrow and will be released to the Company one year from
the closing of the transaction, subject to general representations and
warranties. Historically, the Company has entered into similarly
structured transactions, and collected on the amount held in escrow.
Substantially all of the proceeds were used to pay down amounts
outstanding under the Companys Senior Credit Facility.

The sales were made pursuant to offers by separate, independent third
parties. Based on the offers made, management determined that acceptance
of the offers would be in the best economic interest of the Company. The
sales were not a result of declining or deteriorating operations nor was
it necessary to create liquidity or reduce outstanding debt. It is the
opinion of management that the Company could have continued existing
operations and met all obligations as they became due.

Obligations and Commitments

In addition to working capital needs for ongoing operations, the Company
has capital requirements for (i) annual maturities and interest payments
related to the term loan and (ii) required minimum operating lease
payments. The following table summarizes the Companys contractual
obligations, after effecting for the sales of the Aiken System and the
Port Angeles System, and the anticipated effect of these obligations on
its liquidity for the remainder of 2003 and in future years:





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##### Table of Contents



|                                                                                |  |                        |           |      |  |      |            |      |  |      |            |            |  |       |            |  |  |   |             |  |  |   |        |  |  |   |             | 
|------------------------------------------------------------------------------- |  | ---------------------- | --------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- | ---------- |  | ----- | ---------- |  |  | - | ----------- |  |  | - | ------ |  |  | - | ----------- | 
|                                                                                |  | Expected Maturity Date
|                                                                                |  |                       
|                                                                                |  | 2003                   |           | 2004 |  | 2005 |            | 2006 |  | 2007 |            | Thereafter |  | Total
|                                                                                |  |                        |           |      |  |      |            |      |  |      |            |            |  |      
|Debt maturity                                                                   |  | $                      | 1,750,000 |      |  | $    | 5,250,000  |      |  | $    | 7,000,000  |            |  | $     | 2,226,534  |  |  | $ | 100,000,000 |  |  | $ | 0      |  |  | $ | 116,226,534 | 
|Interest payments (weighted average
interest rate of 9.29% as of June 30,
2003) |  |                        | 5,385,488 |      |  |      | 10,647,026 |      |  |      | 10,441,839 |            |  |       | 10,287,294 |  |  |   | 9,395,833   |  |  |   |       |  |  |   | 46,157,480  | 
|Minimum operating lease payments                                                |  |                        | 41,665    |      |  |      | 74,296     |      |  |      | 55,331     |            |  |       | 44,663     |  |  |   | 37,006      |  |  |   | 53,831 |  |  |   | 306,792     | 
|                                                                                |  |                        |           |      |  |      |            |      |  |      |            |            |  |       |            |  |  |   |             |  |  |   |        |  |  |   |             | 
|Total contractual cash obligations (a)                                          |  | $                      | 7,177,153 |      |  | $    | 15,971,322 |      |  | $    | 17,497,170 |            |  | $     | 12,558,491 |  |  | $ | 109,432,839 |  |  | $ | 53,831 |  |  | $ | 162,690,806 | 



|(a) |  | These contractual obligations do not include accounts payable and
accrued liabilities, which are expected to be paid in 2003.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------

Capital Expenditures

For the six months ended June 30, 2003, the Company incurred capital
expenditures of approximately $2.7 million. Capital expenditures
included: (i) continued deployment of new product digital services; (ii)
expansion and improvement of cable properties; (iii) additions to plant
and equipment, and; (iv) line drops, extensions and installations of
cable plant facilities.

The Company plans to invest approximately $2.6 million in capital
expenditures for the remainder of 2003. This represents anticipated
expenditures for upgrading and rebuilding certain distribution
facilities, which will allow for the continued deployment of new
products, such as digital and Internet services in selected markets.
Furthermore, capital expenditures will involve extensions of distribution
facilities to add new subscribers and vehicle replacements.

Recently Issued Accounting Standards

Statement of Financial Accounting Standards No. 143- Effective January
1, 2003, the Company adopted SFAS No. 143, Accounting for Asset
Retirement Obligations, (SFAS No. 143) which addresses financial
accounting and reporting for obligations associated with the retirement
of tangible long lived assets and associated asset retirement obligations
(ARO). Under the scope of this pronouncement, the Company has ARO
associated with the removal of equipment from poles and headend sites
that are leased from third parties. Based on managements analyses, the
Company has concluded that for the reasons mentioned below, it is not
able to reasonably estimate the fair values of the ARO. First, to
operate the cable television network, the Company will always need to
have equipment deployed at these poles and headend sites. Additionally,
the has not historically incurred any ARO and, given the length of time
in the future when any potential obligations might exist, management
believes that estimating any probability at this time is not practicable.
As a result, upon adoption of SFAS No. 143, the Company did not record
any ARO associated with the obligation to remove the equipment.

Critical Accounting Policies

This discussion and analysis of our financial condition and results
of operations is based on the Companys financial statements, which
have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation
of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following critical
accounting policies, which have been chosen among alternatives,
require a more significant amount of management judgment than other
accounting policies the Company employs.

Revenue Recognition- Cable television service revenue, including service
and maintenance, is recognized in the month service is provided to
customers. Advance payments on cable services to be rendered are
recorded as subscriber prepayments. Revenues resulting from the sale of
local spot advertising are recognized when the related advertisements or
commercials appear before the public.





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##### Table of Contents



Property and Equipment- Property and equipment are recorded at cost.
Costs of additions and substantial improvements, which include materials,
labor, and other indirect costs associated with the construction of cable
transmission and distribution facilities, are capitalized. Indirect
costs include employee salaries and benefits, travel and other costs.
These costs are estimated based on historical information and analysis.
The Company periodically performs evaluations of these estimates as
warranted by events or changes in circumstances.

In accordance with SFAS No. 51, Financial Reporting by Cable
Television Companies, the Company also capitalizes costs associated
with initial customer installations. The costs of disconnecting
service or reconnecting service to previously installed locations is
expensed in the period incurred. Costs for repairs and maintenance
are also charged to operating expense, while equipment replacements,
including the replacement of drops, are capitalized.

Intangible Assets- In accordance with the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets, the Company does not amortize
goodwill or any other intangible assets determined to have indefinite
lives. The Company has determined that its franchises meet the
definition of indefinite lived assets. The Company tests these assets
for impairment on an annual basis during the fourth quarter, or on an
interim basis if an event occurs or circumstances change that would
reduce the fair value of a reporting unit below its carrying value or if
the fair value of intangible assets with indefinite lives falls below
their carrying value on an annual basis.

Management believes the franchises have indefinite lives because the
franchises are expected to be used by the Company for the
foreseeable future and effects of obsolescence, competition and
other factors are minimal. In addition, the level of maintenance
expenditures required to obtain the future cash flows expected from
the franchises are not material in relation to the carrying value of
the franchises. While the franchises have defined lives based on
the franchising authority, renewals are routinely granted, and
management expects them to continue to be granted. This expectation
is supported by managements experience with the Companys
franchising authorities and the franchising authorities of the
Companys affiliates.





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##### Table of Contents






ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to market risks arising from changes in interest
rates. The Companys primary interest rate exposure results from changes
in LIBOR or the prime rate, which are used to determine the interest rate
applicable to the Companys debt facilities. The Company has from time
to time entered into interest rate swap agreements to partially hedge
interest rate exposure. Interest rate swaps have the effect of
converting the applicable variable rate obligations to fixed or other
variable rate obligations. As of the date of this filing, the Company is
not involved in any interest rate swap agreements. The potential loss
over one year that would result from a hypothetical, instantaneous and
unfavorable change of 100 basis points in the interest rate of all of the
Companys variable rate obligations would be approximately $162,000.

The Company does not use financial instruments for trading or other
speculative purposes.

Cautionary statement for purposes of the Safe Harbor provisions of
the Private Litigation Reform Act of 1995. Statements contained or
incorporated by reference in this document that are not based on
historical fact are forward-looking statements within the meaning of
the Private Securities Reform Act of 1995. Forward-looking statements
may be identified by use of forward-looking terminology such as
believe, intends, may, will, expect, estimate,
anticipate, continue, or similar terms, variations of those terms
or the negative of those terms.




ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation as of the end of the period covered by this
report, the Companys Chief Executive Officer and President (Principal
Financial and Accounting Officer) have concluded that the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the Exchange
Act)) are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules and
forms.

There were no significant changes in the Companys internal controls or
in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.





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##### Table of Contents



PART II  OTHER INFORMATION




ITEM 1 Legal proceedings

The Company is a party to ordinary and routine litigation proceedings
that are incidental to the Companys business. Management believes
that the outcome of all pending legal proceedings will not,
individually or in the aggregate, have a material adverse effect on the
Company, its financial condition, prospects and debt service ability.




ITEM 2 Changes in securities

None




ITEM 3 Defaults upon senior securities

None




ITEM 4 Submission of matters to a vote of security holders

None




ITEM 5 Other information

None




ITEM 6 Exhibits and Reports on Form 8-K

(a)  Exhibit Index

|       |  |                                                                                                                                                
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|31(a). |  | Certification of Chief Executive Officer
dated August 13, 2003 pursuant to section 302 of the
Sarbanes-Oxley Act                               
|       |  |                                                                                                                                                
|31(b). |  | Certification of President (Principal
Financial and Accounting Officer) dated August 13, 2003
pursuant to section 302 of the Sarbanes-Oxley Act
|       |  |                                                                                                                                                
|32(a). |  | Certification of Chief Executive Officer
dated August 13, 2003 pursuant to section 906 of the
Sarbanes-Oxley Act                               
|       |  |                                                                                                                                                
|32(b). |  | Certification of President (Principal
Financial and Accounting Officer) dated August 13, 2003
pursuant to section 906 of the Sarbanes-Oxley Act

(b)  Reports on Form 8-K

None





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##### Table of Contents






SIGNATURES

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.

NORTHLAND CABLE TELEVISION, INC. AND SUBSIDIARY

|                                      |  |                                                             |  |        
|------------------------------------- |  | ----------------------------------------------------------- |  | -------
|SIGNATURES                            |  | CAPACITIES                                                  |  | DATE   
|                                      |  |                                                             |  |        
|                                      |  |                                                             |  |        
|/s/ RICHARD I. CLARK

Richard I Clark |  | Executive Vice President, Treasurer and
Assistant Secretary |  | 8-13-03
|                                      |  |                                                             |  |        
|/s/ GARY S. JONES

Gary S. Jones      |  | President                                                   |  | 8-13-03