##### 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 March 31, 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
(State or other jurisdiction of incorporation) |  | 91-1311836
(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
(State or other jurisdiction of incorporation) |  | 91-1638891
(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

This
filing contains 17 pages. Exhibits index
appears on page 14.





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TABLE OF CONTENTS



|                               |                                                                                               |  |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART 1  FINANCIAL INFORMATION
|                               | ITEM 1. 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                    
|CERTIFICATIONS                
|EXHIBIT 99 (A)                
|EXHIBIT 99 (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)

|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |             |             |             |  
|---------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | --------------------------- | ----------- | ----------- | ----------- | ------------ | ----------- | ----------- | ----------- | -
|                                                                                                     |                                                                                                                                         |                                                 |                             |             | March 31,   |             | December 31,
|                                                                                                     |                                                                                                                                         |                                                 |                             |             | 2003        |             | 2002        
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |             
|ASSETS                                                                                               |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|Current Assets:                                                                                      |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|                                                                                                     | Cash and cash equivalents                                                                                                               |                                                 | $                           | 5,646,898   |             |             | $            | 1,538,002   |            
|                                                                                                     | Due from Parent and affiliates                                                                                                          |                                                 |                             | 1,045,845   |             |             |              | 796,464     |            
|                                                                                                     | System
sale receivable                                                                                                                  |                                                 |                             | 4,083,000   |             |             |              |            |            
|                                                                                                     | Accounts receivable                                                                                                                     |                                                 |                             | 1,681,010   |             |             |              | 2,047,900   |            
|                                                                                                     | Prepaid expenses                                                                                                                        |                                                 |                             | 498,075     |             |             |              | 392,271     |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|                                                                                                     |                                                                                                                                         | Total current assets                            |                             |             | 12,954,828  |             |              |             | 4,774,637   |            
|Investment in Cable Television Properties:                                                           |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|Property and equipment, net of accumulated
depreciation of $54,413,063 and $52,255,286,
respectively |                                                                                                                                         |                                                 | 43,066,553                  |             |             |             | 44,152,208   |            
|Franchise agreements, net of accumulated amortization
of $38,923,291                                 |                                                                                                                                         |                                                 | 39,487,137                  |             |             |             | 39,487,137   |            
|Goodwill, net of accumulated amortization
of $2,407,104                                              |                                                                                                                                         |                                                 | 3,937,329                   |             |             |             | 3,937,329    |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|                                                                                                     |                                                                                                                                         | Total investment in cable television properties |                             |             | 86,491,019  |             |              |             | 87,576,674  |            
|Loan fees, net of accumulated amortization of $2,195,910
and $2,650,564, respectively                |                                                                                                                                         |                                                 | 2,022,676                   |             |             |             | 3,188,581    |            
|Other intangible assets, net of accumulated
amortization of $3,158,865 and $3,140,381, respectively  |                                                                                                                                         |                                                 | 118,124                     |             |             |             | 136,608      |            
|Assets from discontinued operations                                                                  |                                                                                                                                         |                                                 |                            |             |             |             | 25,504,853   |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|                                                                                                     |                                                                                                                                         | Total assets                                    |                             | $           | 101,586,647 |             |              | $           | 121,181,353 |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|LIABILITIES
AND SHAREHOLDERS DEFICIT                                                                |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|Current
Liabilities:                                                                                 |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|                                                                                                     | Accounts payable                                                                                                                        |                                                 | $                           | 79,787      |             |             | $            | 528,645     |            
|                                                                                                     | Accrued expenses                                                                                                                        |                                                 |                             | 7,716,930   |             |             |              | 4,705,722   |            
|                                                                                                     | Converter deposits                                                                                                                      |                                                 |                             | 116,610     |             |             |              | 116,027     |            
|                                                                                                     | Subscriber prepayments                                                                                                                  |                                                 |                             | 1,402,105   |             |             |              | 1,629,235   |            
|                                                                                                     | Due to affiliates                                                                                                                       |                                                 |                             | 217,611     |             |             |              | 228,220     |            
|                                                                                                     | Current portion of notes payable                                                                                                        |                                                 |                             | 3,062,500   |             |             |              | 2,775,920   |            
|                                                                                                     | Income
tax payable                                                                                                                      |                                                 |                             | 500,000     |             |             |              |            |            
|                                                                                                     | Interest rate swap agreements                                                                                                           |                                                 |                             |            |             |             |              | 120,377     |            
|                                                                                                     | Liabilities from discontinued operations                                                                                                |                                                 |                             |            |             |             |              | 1,443,610   |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|                                                                                                     |                                                                                                                                         |                                                 | Total current liabilities   |             |             | 13,095,543  |              |             |             | 11,547,756  |  
|                                                                                                    
|Notes payable, net of current portion                                                                |                                                                                                                                         |                                                 | 113,164,034                 |             |             |             | 165,255,262  |            
|Deferred tax liabilities                                                                             |                                                                                                                                         |                                                 | 81,422                      |             |             |             |             |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|                                                                                                     |                                                                                                                                         |                                                 | Total liabilities           |             |             | 126,340,999 |              |             |             | 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                                                                                                                     |                                                 |                             | (37,113,729 | )           |             |              | (67,981,042 | )          
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|                                                                                                     |                                                                                                                                         |                                                 | Total shareholders deficit |             |             | (24,754,352 | )            |             |             | (55,621,665 | )
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            
|Total liabilities and shareholders deficit                                                          |                                                                                                                                         | $                                               | 101,586,647                 |             |             | $           | 121,181,353  |            
|                                                                                                     |                                                                                                                                         |                                                 |                             |             |             |             |              |            

The accompanying notes are an integral part of these consolidated balance sheets.





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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 March 31,
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            | 2003                                 |            | 2002     
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|Service revenues                                            |                                                                                                                                                                        | $                                                                                                                                       | 12,405,755                                                                                           |                          |            | $                                    | 12,133,311 |          
|Expenses:                                                   |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|                                                            | Cable system operations (including
$69,995 and $57,343, net paid to affiliates
in 2003 and 2002, respectively), exclusive of
depreciation and amortization shown below |                                                                                                                                         |                                                                                                      | 4,822,356                |            |                                      |            | 4,604,446 |           
|                                                            | General and administrative (including
$600,056, net paid to affiliates in 2003,
and $36,547, net received from affiliates 2002)                                        |                                                                                                                                         |                                                                                                      | 2,157,102                |            |                                      |            | 1,671,177 |           
|                                                            | Management fees paid to Parent                                                                                                                                         |                                                                                                                                         |                                                                                                      | 620,288                  |            |                                      |            | 606,596   |           
|                                                            | Depreciation and amortization                                                                                                                                          |                                                                                                                                         |                                                                                                      | 2,177,256                |            |                                      |            | 2,169,393 |           
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      | Total operating expenses |            |                                      | 9,777,002  |           |            |          | 9,051,612 |  
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|Income from operations                                      |                                                                                                                                                                        |                                                                                                                                         | 2,628,753                                                                                            |                          |            |                                      | 3,081,699  |          
|Other income (expense):                                     |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|                                                            |                                                                                                                                                                        | Interest expense                                                                                                                        |                                                                                                      |                          | (2,423,987 | )                                    |            |           | (3,132,960 | )       
|                                                            |                                                                                                                                                                        | Interest income and other, net                                                                                                          |                                                                                                      |                          | (131       | )                                    |            |           | 4,825      |         
|                                                            |                                                                                                                                                                        | Unrealized gain on interest rate swap agreements                                                                                        |                                                                                                      |                          | 120,377    |                                      |            |           | 968,175    |         
|                                                            |                                                                                                                                                                        | Gain (loss) on disposal of assets                                                                                                       |                                                                                                      |                          | 174        |                                      |            |           | (5,824     | )       
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         | (2,303,567                                                                                           | )                        |            |                                      | (2,165,784 | )        
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|Income from continuing operations before income
tax expense |                                                                                                                                                                        |                                                                                                                                         | 325,186                                                                                              |                          |            |                                      | 915,915    |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         | Income tax expense                                                                                   |                          |            | (81,422                              | )          |           |            |         |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|Income from continuing operations                           |                                                                                                                                                                        |                                                                                                                                         | 243,764                                                                                              |                          |            |                                      | 915,915    |          
|                                                           
|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) |                                                                                                      |                          | 30,623,549 |                                      |            |           | (426,627   | )       
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|Net income                                                  |                                                                                                                                                                        |                                                                                                                                         | 30,867,313                                                                                           |                          |            |                                      | 489,288    |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|Other comprehensive loss:                                   |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         | Reclassification of accumulated other comprehensive
income to unrealized gain on interest rate swaps |                          |            |                                     |            |           |            | (104,000 | )        
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      | Other comprehensive loss |            |                                      |           |           |            |          | (104,000  | )
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          
|Total comprehensive income                                  |                                                                                                                                                                        | $                                                                                                                                       | 30,867,313                                                                                           |                          |            | $                                    | 385,288    |          
|                                                            |                                                                                                                                                                        |                                                                                                                                         |                                                                                                      |                          |            |                                      |            |          

The accompanying notes are an integral part of these consolidated balance sheets.





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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 three months ended March 31,
|                                                                              |                                                    |                                       |             | 2003                                 |           | 2002
|                                                                              |                                                    |                                       |             |                                      |           |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                         |                                                    |                                       |             |                                      |           |      |            |          
|Net income                                                                    |                                                    | $                                     | 30,867,313  |                                      |           | $    | 489,288    |          
|Adjustments to reconcile net income to
cash provided by operating activities: |                                                    |                                       |             |                                      |           |      |            |          
|                                                                              | Depreciation and amortization                      |                                       |             | 2,595,054                            |           |      |            | 2,636,755 |          
|                                                                              | Unrealized gain on interest rate swap agreements   |                                       |             | (120,377                             | )         |      |            | (968,175  | )        
|                                                                              | Amortization of loan costs                         |                                       |             | 170,140                              |           |      |            | 167,996   |          
|                                                                              | (Gain) loss on disposal of assets                  |                                       |             | (31,525,759                          | )         |      |            | 5,824     |          
|                                                                              | Deferred income taxes                              |                                       |             | 81,422                               |           |      |            |           |          
|                                                                              | (Increase) decrease in operating assets:           |                                       |             |                                      |           |      |            |           |          
|                                                                              |                                                    | Accounts receivable                   |             |                                      | 366,890   |      |            |           | (53,796   | )
|                                                                              |                                                    | Prepaid expenses                      |             |                                      | (105,805  | )    |            |           | (24,545   | )
|                                                                              |                                                    | Due from Parent and affiliates        |             |                                      | (249,381  | )    |            |           | (617,294  | )
|                                                                              | Increase (decrease) in operating liabilities       |                                       |             |                                      |           |      |            |           |          
|                                                                              |                                                    | Accounts payable and accrued expenses |             |                                      | 1,570,943 |      |            |           | 1,239,295 |  
|                                                                              |                                                    | Due to affiliates                     |             |                                      | (10,609   | )    |            |           | 552,923   |  
|                                                                              |                                                    | Converter deposits                    |             |                                      | 581       |      |            |           | (209      | )
|                                                                              |                                                    | Subscriber prepayments                |             |                                      | (227,130  | )    |            |           | 379,372   |  
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          
|Net cash provided by operating activities                                     |                                                    |                                       | 3,413,282   |                                      |           |      | 3,807,434  |          
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                         |                                                    |                                       |             |                                      |           |      |            |          
|Investment in cable television properties                                     |                                                    |                                       | (1,073,540  | )                                    |           |      | (1,594,614 | )        
|Proceeds from sale of cable system                                            |                                                    |                                       | 53,445,107  |                                      |           |      | 226,088    |          
|Proceeds from disposal of assets                                              |                                                    |                                       | 600         |                                      |           |      | 5,550      |          
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          
|Net cash provided by (used in) investing activities                           |                                                    |                                       | 52,372,167  |                                      |           |      | (1,362,976 | )        
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                         |                                                    |                                       |             |                                      |           |      |            |          
|Proceeds from notes payable                                                   |                                                    |                                       |            |                                      |           |      |           |          
|Principal payments on borrowings                                              |                                                    |                                       | (51,804,648 | )                                    |           |      |           |          
|Loan fees and other costs incurred                                            |                                                    |                                       |            |                                      |           |      | (6,426     | )        
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          
|Net cash used in financing activities                                         |                                                    |                                       | (51,804,648 | )                                    |           |      | (6,426     | )        
|INCREASE IN CASH                                                              |                                                    |                                       | 3,980,801   |                                      |           |      | 2,438,032  |          
|CASH, beginning of period                                                     |                                                    |                                       | 1,666,097   |                                      |           |      | 2,724,099  |          
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          
|CASH, end of period                                                           |                                                    | $                                     | 5,646,898   |                                      |           | $    | 5,162,131  |          
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                             |                                                    |                                       |             |                                      |           |      |            |          
|                                                                              | Cash paid during the period for interest           |                                       | $           | 982,009                              |           |      | $          | 1,727,177 |          
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          
|                                                                              | Cash paid during the period for state income taxes |                                       | $           | 7,410                                |           |      | $          | 4,881     |          
|                                                                              |                                                    |                                       |             |                                      |           |      |            |          

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





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##### Table of Contents



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

NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 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 March 31, 2003, its consolidated
statements of operations and comprehensive income for the three months
ended March 31, 2003 and 2002 and its consolidated statements of cash
flows for the three months ended March 31, 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 reporting of 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 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:

|                                    |                         |   |                |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |            | 
|----------------------------------- | ----------------------- | - | -------------- | ---------- | ----------------- | - | ----------- | ----------- | -------- | - | ------------ | ---------- | -------- | - | ---------- | ---------- |  | - | ----------- | ----------- | - | - | ---------- | ---------- | 
|                                    |                         |   | March 31, 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              |   | $              | 78,410,428 |                   |   | $           | (38,923,291 | )        |   | $            | 39,487,137 |          |   | $          | 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  | 
|                                    |                         |   |                |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           
|                                    |                         |   | 84,754,861     |            |                   |   | (41,330,395 | )           |          |   | 43,424,466   |            |          |   | 84,754,861 |            |  |   | (41,330,395 | )           |   |   | 43,424,466 |           
|Definite-lived
intangible assets:   |                         |   |                |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           
|                                    | Loan fees               |   |                | 4,218,586  |                   |   |             | (2,195,910  | )        |   |              | 2,022,676  |          |   |            | 5,839,145  |  |   |             | (2,650,564  | ) |   |            | 3,188,581  | 
|                                    | Other intangible assets |   |                | 3,276,989  |                   |   |             | (3,158,865  | )        |   |              | 118,124    |          |   |            | 3,276,989  |  |   |             | (3,140,381  | ) |   |            | 136,608    | 
|                                    |                         |   |                |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           
|                                    |                         | $ | 92,250,436     |            |                   | $ | (46,685,170 | )           |          | $ | 45,565,266   |            |          | $ | 93,870,995 |            |  | $ | (47,121,340 | )           |   | $ | 46,749,655 |           
|                                    |                         |   |                |            |                   |   |             |             |          |   |              |            |          |   |            |            |  |   |             |             |   |   |            |           





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##### Table of Contents



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

|     |  |   |           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|---- |  | - | --------- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|2003 |  | $ | 570,000   | 
|2004 |  |   | 472,000   | 
|2005 |  |   | 472,000   | 
|2006 |  |   | 466,000   | 
|2007 |  |   | 349,000   | 
|     |  |   |           | 
|     |  | $ | 2,329,000 | 
|     |  |   |           | 



|(3) |  | Notes Payable
|--- |  | -------------

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
3.58%. 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 revolving credit and term loan agreement, 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 March 31, 2003, the Company was in
compliance with the terms of the loan agreement.

As of the date of this filing, the balance under the credit facility is
$16,226,534, and applicable interest rates are as follows: $15,726,534 at
a LIBOR based interest rate of 3.58%, which expires July 22, 2003 and
$500,000 at a LIBOR based rate of 3.58%, which expires May 22, 2003. The
above rates include a margin paid to the lender based on overall leverage,
and may increase or decrease as the Companys leverage fluctuates.



|(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.





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##### Table of Contents



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
sheets, 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 for the three months ended
March 31, 2003 (the date of sale of the system) and 2002 and to
the operations of the Port Angeles System for the period from
January 1, 2003 to March 11, 2003 (the date of sale of the
system) and for the three
months ended March 31, 2002 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



|                                                                                   |                                                                                                                                   |   |            |            |      |   |           |            |  
|---------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | - | ---------- | ---------- | ---- | - | --------- | ---------- | -
|                                                                                   |                                                                                                                                   |   | 2003       |            | 2002
|                                                                                   |                                                                                                                                   |   |            |            |     
|Service revenues                                                                   |                                                                                                                                   | $ | 3,079,389  |            |      |   | 3,081,497 |           
|Expenses:                                                                          |                                                                                                                                   |   |            |            |      |   |           |           
|                                                                                   | Cable systems operations (including
$6,289 and $20,943, net paid to
affiliates in 2003 and 2002, respectively)                    |   |            | 1,205,573  |      |   |           | 1,140,394  |  
|                                                                                   | General and administrative (including
$152,093, net paid to affiliates in 2003
and $17,571, net received from affiliates
in 2002) |   |            | 573,781    |      |   |           | 458,947    |  
|                                                                                   | Management fees paid to Parent                                                                                                    |   |            | 153,637    |      |   |           | 154,075    |  
|                                                                                   | Depreciation and amortization                                                                                                     |   |            | 417,798    |      |   |           | 467,362    |  
|                                                                                   |                                                                                                                                   |   |            |            |      |   |           |           
|                                                                                   |                                                                                                                                   |   | 2,350,789  |            |      |   | 2,220,778 |           
|                                                                                   |                                                                                                                                   |   |            |            |      |   |           |           
|Income from operations                                                             |                                                                                                                                   | $ | 728,600    |            |      | $ | 860,719   |           
|                                                                                   |                                                                                                                                   |   |            |            |      |   |           |           
|Other income (expense):                                                            |                                                                                                                                   |   |            |            |      |   |           |           
|                                                                                   | Interest expense                                                                                                                  |   |            | (1,130,636 | )    |   |           | (1,287,346 | )
|                                                                                   | Gain on sale of system                                                                                                            |   |            | 31,525,585 |      |   |           |           |  
|                                                                                   |                                                                                                                                   |   |            |            |      |   |           |           
|Income from operation of Aiken and Port
Angeles Systems, before income tax expense |                                                                                                                                   |   | 31,123,549 |            |      |   | (426,627  | )         
|Income tax expense                                                                 |                                                                                                                                   |   | (500,000   | )          |      |   |          |           
|                                                                                   |                                                                                                                                   |   |            |            |      |   |           |           
|Income from operations of Aiken and Port
Angeles System, net                       |                                                                                                                                   | $ | 30,623,549 |            |      | $ | (426,627  | )         
|                                                                                   |                                                                                                                                   |   |            |            |      |   |           |           

In accordance with EITF 87-24, Allocation of Interest to Discontinued
Operations, the Company allocated interest expense based on the historical weighted
average effective interest rate.





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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  Three Months Ended March 31, 2003 and 2002

Revenues totaled $12.4 million for the three months ended March 31, 2003
an increase of approximately $300,000 or 2.5% over the same period in
2002. Of these revenues, $8.5 million (68%) was derived from basic
services, $900,000 (7%) from premium services, $1.6 million (13%) from
expanded basic services, $200,000 (2%) from digital services, $600,000
(5%) from advertising and $600,000 (5%) from other sources.

Average monthly revenue per subscriber increased $2.33 or 5.2% from $44.64
for the three months ended March 31, 2002 to $46.97 for the three months
ended March 31, 2003. This increase is primarily attributable to rate
increases implemented during the first quarter of 2002, increased revenue
from higher penetration of new product tiers and a 10% increase in
advertising revenue.

Cable system operation expenses increased approximately $200,000 or 4.3%
from $4.6 million to $4.8 million for the three months ended March 31,
2003. Programming costs, which represent the primary component of cable
system operation expenses, increased $200,000 or 5.9% 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 $500,000 or
29.4% from $1.7 million to $2.2 million for the three months ended March
31, 2003. This increase is primarily attributable to increases in
corporate overhead allocations by the Companys Parent, which 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 represent 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 March 31, 2003 increased
approximately 2.3% 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 March
31, 2003 remained relatively constant with the same period in 2002.

Interest expense decreased approximately $700,000 or 22.6%, from $3.1
million to $2.4 million for the three months ended March 31, 2003.
Average outstanding indebtedness decreased $16.0 million from $171.1
million to $155.1 million for the three months ended March 31, 2002 and
2003, respectively. This is primarily attributable 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 to Discontinued
Operations, the Company allocated interest expense based on the historical weighted
average effective interest rate.

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.

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





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##### Table of Contents



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 through December 31, 2003. The Company
believes that cash flow from operations will be adequate to meet the
Companys long-term 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 $3.4 million for the
three months ended March 31, 2003. Adjustments to the $30.9 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, offset by $2.6 million of
depreciation and amortization and increases in operating liabilities of
approximately $900,000.

Net cash used in investing activities
was $52.4 million for the three
months ended March 31, 2003, and consisted of $53.4 million of proceeds from
the sales of the Aiken System and the Port Angeles System, offset by
$1.1 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 $500,000 or 9.4%, from $5.3 million to
$4.8 million for the three months ended March 31, 2003, and EBITDA margin
decreased from 43.2% to 38.7%. 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 increased $776,000, or 248%, from $524,000 to $1.3 million
for the three months ended March 31, 2003. This increase is attributable
to declining interest expense and capital expenditures, offset by the
aforementioned decline in EBITDA.

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 three months
|                                                                             |  | ended March 31,     
|                                                                             |  |                     
|                                                                             |  | 2003                 |            | 2002
|                                                                             |  |                      |            |     
|Net cash provided by operating activities                                    |  |                      | 3,413,282  |      |  | 3,807,434  |   | 
|Interest expense, excluding amortization of
loan fees                        |  |                      | 2,423,987  |      |  | 3,132,960  |   | 
|Changes in certain assets and liabilities, net
of acquisition
and other, net |  |                      | (1,031,260 | )    |  | (1,689,302 | ) | 
|                                                                             |  |                      |            |      |  |            |   | 
|EBITDA                                                                       |  |                      | 4,806,009  |      |  | 5,251,092  |   | 
|Interest expense, excluding amortization of
loan fees                        |  |                      | (2,423,987 | )    |  | (3,132,960 | ) | 
|Capital expenditures                                                         |  |                      | (1,073,540 | )    |  | (1,594,614 | ) | 
|                                                                             |  |                      |            |      |  |            |   | 
|Free cash flow                                                               |  |                      | 1,308,482  |      |  | 523,518    |   | 
|                                                                             |  |                      |            |      |  |            |   | 





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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
3.58%. 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 credit facility is
$16,226,534, and applicable interest rates are as follows: $15,726,534 at
a LIBOR based interest rate of 3.58% expiring July 22, 2003 and $500,000
at a LIBOR based rate of 3.58% expiring May 22, 2003. The above rates
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 in future years:

|                                                                                 |  |                        |            |      |  |      |            |      |  |      |            |            |  |       |            |  |  |   |             |  |  |   |        |  |  |   |             | 
|-------------------------------------------------------------------------------- |  | ---------------------- | ---------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- | ---------- |  | ----- | ---------- |  |  | - | ----------- |  |  | - | ------ |  |  | - | ----------- | 
|                                                                                 |  | 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 9.32% as of March
31, 2003) |  |                        | 11,726,888 |      |  |      | 10,674,285 |      |  |      | 10,455,010 |            |  |       | 10,289,855 |  |  |   | 9,395,833   |  |  |   |       |  |  |   | 52,541,871  | 
|Minimum operating lease payments                                                 |  |                        | 91,150     |      |  |      | 74,296     |      |  |      | 55,331     |            |  |       | 44,663     |  |  |   | 37,006      |  |  |   | 53,831 |  |  |   | 356,277     | 
|                                                                                 |  |                        |            |      |  |      |            |      |  |      |            |            |  |       |            |  |  |   |             |  |  |   |        |  |  |   |             | 
|Total contractual cash obligations (a)                                           |  | $                      | 13,568,038 |      |  | $    | 15,998,581 |      |  | $    | 17,510,341 |            |  | $     | 12,561,052 |  |  | $ | 109,432,839 |  |  | $ | 53,831 |  |  | $ | 169,124,682 | 





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##### Table of Contents



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

Capital Expenditures

For the three months ended March 31, 2003, the Company incurred capital
expenditures of approximately $1.1 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 $4.2 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

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 reporting of 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 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.

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.

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





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##### Table of Contents



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

Within 90 days prior to the date of filing this report, an evaluation was
performed under the supervision and with the participation of the
Companys management, including the Chief Executive Officer and President
(Principal Financial and Accounting Officer), of the effectiveness of the
design and operation of the Companys disclosure controls and procedures
(as defined in Rule 13a-14(c) of the Exchange Act). Based on and as of the
time of such evaluation, the Companys management, including the Chief
Executive Officer and President (Principal Financial and Accounting
Officer), concluded that the Companys disclosure controls and procedures
were effective in timely alerting them to material information relating to
the Company required to be included in the Companys reports filed or
submitted by it under the Exchange Act. There have been no significant
changes in the Companys internal controls or in other factors that could
significantly affect internal controls subsequent to the time of such
evaluation.





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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      
|    |  |                     |  |                                                                                                                                                                                                     
|    |  | 99(a).              |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                   
|    |  |                     |  |                                                                                                                                                                                                     
|    |  | 99(b).              |  | Certification of the President Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002                                                             
|    |  |                     |  |                                                                                                                                                                                                     
|(b) |  | Reports on Form 8-K
|    |  |                     |  |                                                                                                                                                                                                     
|    |  | (i)                 |  | Form 8-K filed on January 23, 2003 announcing the
execution of purchase and sale agreements to sell the Port
Angeles, Washington and the Aiken, South Carolina systems,
independently of each other.
|    |  |                     |  |                                                                                                                                                                                                     
|    |  | (ii)                |  | Form 8-K filed March 25, 2003 announcing the sale of
the Port Angeles, Washington system                                                                                                            
|    |  |                     |  |                                                                                                                                                                                                     
|    |  | (iii)               |  | Form 8-K filed April 1, 2003 announcing the sale of
the Aiken, South Carolina system                                                                                                                





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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. CLARKRichard I. Clark |  | Executive Vice President,
Treasurer and Assistant
Secretary |  | 5-15-03
|                                               
|                                                |  |                                                             |  |        
|                                               
|/s/              GARY S. JONESGary S. Jones     |  | President                                                   |  | 5-15-03





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##### Table of Contents






CERTIFICATIONS

I, Gary Jones certify that:



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



| | a) |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | Presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and board of
directors:
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | All significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants
auditors any material weakness in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material that involves
management or other employees who have a significant role in
the registrants internal controls; and                                                                                                                                       



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

Date: 5-15-03

|                                                                                          |  | 
|----------------------------------------------------------------------------------------- |  | 
|/s/   GARY S. JONES

Gary S. Jones
President
(Principal Financial and Accounting Officer)





---



##### Table of Contents



I, John Whetzell certify that:



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



| | a) |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | Presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and board of
directors:
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | All significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants
auditors any material weakness in internal controls; and
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | Any fraud, whether or not material that involves
management or other employees who have a significant role in
the registrants internal controls; and                                                                                                                                       



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

Date: 5-15-03

|                                                                 |  | 
|---------------------------------------------------------------- |  | 
|/s/   JOHN S. WHETZELL

John S. Whetzell
Chief Executive Officer