##### Table of Contents



FORM 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(As last amended in Rel. No. 34-29354 eff. 7-1-91)


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

FORM 10-K/A

AMENDMENT 1


|    |  |                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended DECEMBER 31, 2001

|    |  |                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------
|[X] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the transition period from _______to________

Commission file number 333-43157

NORTHLAND CABLE TELEVISION, INC.

---

(Exact name of registrant as specified in its charter)


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

AND SUBSIDIARY GUARANTOR:

NORTHLAND CABLE NEWS, INC.

---

(Exact name of registrant as specified in its charter)


|                                                                    |  |                                     
|------------------------------------------------------------------- |  | ------------------------------------
|STATE OF WASHINGTON                                                 |  | 91-1638891                          
|                                                                    |  |                                     
|(State or other jurisdiction of incorporation or organization)      |  | (I.R.S. Employer Identification No.)
|                                                                    |  |                                     
|3600 WASHINGTON MUTUAL TOWER
1201 THIRD AVENUE, SEATTLE, WASHINGTON |  | 98101                               
|                                                                    |  |                                     
|(Address of principal executive offices)                            |  | (Zip Code)                          

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

Securities registered pursuant to including Section 12(b) of the Act:

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|                    |  |                                          
|(NONE)              |  | (NONE)                                   

Securities registered pursuant to Section 12(g) of the Act:

10 1/4% Senior Subordinated Notes due 2007

---

(Title of class)


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   [   ]

The following documents are incorporated into this Report by reference:
None

This filing contains 56 pages. Exhibits Index and Financial Statements/Schedules Index appear on page 30.

1



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TABLE OF CONTENTS



|               |                                                                                               |  |  |  |  |  |  | 
|-------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I        
|               | ITEM 1. BUSINESS                                                                             
|               | ITEM 2. PROPERTIES                                                                           
|               | ITEM 3. LEGAL PROCEEDINGS                                                                    
|               | ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS                                    
|PART II       
|               | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|               | ITEM 6. SELECTED FINANCIAL DATA                                                              
|               | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|               | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|               | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III      
|               | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|               | ITEM 11. EXECUTIVE COMPENSATION                                                              
|               | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|               | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|               | ITEM 14. CONTROLS AND PROCEDURES                                                             
|PART IV       
|               | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|SIGNATURES    
|EXHIBITS INDEX
|EXHIBIT 99.1  
|EXHIBIT 99.(A)
|EXHIBIT 99.(B)



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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.




PART I

EXPLANATORY NOTE

This Amendment No. 1 to the Annual Report on Form 10-K for Northland Cable
Television, Inc. and Subsidiary (the Company) for the fiscal year ended
December 31, 2001 is being filed to amend and restate the items described below
contained in our Annual Report on Form 10-K originally filed with the
Securities and Exchange Commission on April 1, 2002.

This Amendment No.1 makes changes to Item 6 (Selected Financial Data), Item 7
(Managements Discussion and Analysis of Financial Condition and Results of
Operations, Item 8 (Financial Statements and Supplementary Data), and Item 14
(Exhibits, Financial Statement Schedules, and Reports on Form 8-K) for the
following purposes:

To restate our consolidated financial statements as of and for the year ended
December 31, 2001, and the four quarters within that year, to correct certain
non-operating, non-cash items related to the transition accounting for certain
interest rate swap agreements, as more fully described in the first paragraphs
of Item 7 and in Note 2 to our consolidated financial statements included in
Item 8, as well as other inconsequential changes in other portions of the
filing; and

To include the report of KPMG LLP on our consolidated financial statements for
the year ended December 31, 2001 in Item 8.

In order to preserve the nature and character of the disclosures set forth in
such Items as originally filed, we have not updated the disclosures in this
report to as of a later date. All information contained in this Amendment No.
1 is subject to updating and supplementing as provided in our reports filed
with the Securities and Exchange Commission subsequent to the date of the
original filing of the Annual Report.




ITEM 1. BUSINESS

Northland Cable Television, Inc. (the Company), a Washington
Corporation, was formed in October 1985 and owns and operates 36 cable
television systems serving small cities, towns, and rural communities in
California, Georgia, South Carolina, North Carolina, Texas and Washington
(collectively the Systems). The Company is a wholly-owned subsidiary of
Northland Telecommunications Corporation (NTC), which, together with the
Company and its other affiliates, has specialized in providing cable
television and related services in non-urban markets since 1981. Other
subsidiaries of NTC include:



| |  |  | NORTHLAND COMMUNICATIONS CORPORATION (NCC)  formed in March 1981 and
principally involved in the ownership and management of cable television
systems. NCC is the sole shareholder of Northland Cable Properties, Inc.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NORTHLAND CABLE PROPERTIES, INC. (NCPI)  formed in February 1995
and principally involved in the direct ownership of local cable
television systems. At December 31, 2001, NCPI is the majority
member of Northland Cable Ventures LLC.

| |                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | NORTHLAND CABLE VENTURES LLC (NCV)  formed in June 1998 and
principally involved in the direct ownership of local cable
television systems. NCVs minority member is an LLC
principally owned by executives of the Company.



| |  |  | NORTHLAND CABLE SERVICES CORPORATION (NCSC)  formed in August 1993 and
principally involved in the development and production of computer
software used in billing and financial record keeping for
Northland-affiliated cable systems and is the sole shareholder of Cable
Ad-Concepts.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | CABLE AD-CONCEPTS, INC. (CAC)  formed in November 1993 and
principally involved in the sale, development and production of
video commercial advertisements that are cablecast on Northland-
affiliated cable systems.

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| |  |  | NORTHLAND MEDIA, INC.  formed in April 1995 as a holding company. Sole
shareholder of the two following entities:
| |  |  | ------------------------------------------------------------------------------------------------------------------

| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | STATESBORO MEDIA, INC.  formed in April 1995 and principally
involved in operating an AM radio station serving the community of
Statesboro, Georgia and surrounding areas.                     
|
| | CORSICANA MEDIA, INC.  purchased in September 1998 from an
affiliate and principally involved in operating an AM radio station
serving the community of Corsicana, Texas and surrounding areas.

Since closing its initial acquisition in 1986, the Company has continued
to target, negotiate and complete acquisitions of cable systems and integrate
the operation of such systems. The Company has increased its basic and
premium subscribers through strategic acquisitions, selective system upgrades
and extensions of its cable systems. As of December 31, 2001, the total
number of basic subscribers served by the Systems was 113,938, and the
Companys penetration rate (basic subscribers as a percentage of homes
passed) was approximately 59%.

The Company has 91 non-exclusive franchises to operate the Systems.
These franchises, which will expire at various dates through 2022, have been
granted by local and county authorities in the areas in which the Systems
operate. The Company has historically been able to renew its franchises
without incurring significant costs, and management believes that any
particular franchise will be renewed or that it can be renewed on
commercially favorable terms, however, no assurances can be given.

Franchise fees are paid to the granting governmental authorities. These
fees vary between 1% and 5% and are generally based on the respective gross
revenues of the Systems in a particular community. The franchises may be
terminated for failure to comply with their respective conditions.

THE SYSTEMS

The Companys systems are divided into four geographical regions. Unless
otherwise indicated, all operating statistical data set forth in the
following table and the region-by-region description of the Systems which
follows are as of December 31, 2001.

|                                  |  |           |         |             |  |             |         |             |  |          |      |             |  |            |       |        |  |  |        |     |  |        |      |         |  |         |       |  |  |  |      |  
|--------------------------------- |  | --------- | ------- | ----------- |  | ----------- | ------- | ----------- |  | -------- | ---- | ----------- |  | ---------- | ----- | ------ |  |  | ------ | --- |  | ------ | ---- | ------- |  | ------- | ----- |  |  |  | ---- | -
|                                  |  |           |         |             |  |             |         |             |  |          |      |             |  |            |       |        |  |  |        |     |  |        |      |         |  | AVERAGE |       |  |  | 
|                                  |  |           |         |             |  |             |         |             |  |          |      |             |  |            |       |        |  |  |        |     |  |        |      |         |  | MONTHLY |       |  |  | 
|                                  |  |           |         |             |  |             |         |             |  |          |      |             |  | PERCENT OF |       |        |  |  |        |     |  |        |      | REVENUE |  |         |       | 
|                                  |  |           |         |             |  | BASIC       |         |             |  |          |      | BASIC       |  | PREMIUM    |       |        |  |  |        | PER |  | EBITDA
|                                  |  | HOMES     |         | SUBSCRIBERS |  | BASIC       |         | SUBSCRIBERS |  | SERVICE  |      | PREMIUM     |  | BASIC      |       | MARGIN
|REGION                            |  | PASSED(1) |         | (2)         |  | PENETRATION |         | (3)         |  | UNITS(4) |      | PENETRATION |  | SUBSCRIBER |       | (5)   
|                                  |  |           |         |             |  |             |         |             |  |          |      |             |  |            |       |       
|So.
Carolina/No. Carolina/Georgia |  |           | 99,030  |             |  |             | 60,519  |             |  |          | 61.1 | %           |  |            | 53.1  | %      |  |  | 27,842 |     |  |        | 46.0 | %       |  | $       | 44.69 |  |  |  | 44.1 | %
|Washington                        |  |           | 25,775  |             |  |             | 16,341  |             |  |          | 63.4 | %           |  |            | 14.3  | %      |  |  | 4,940  |     |  |        | 30.2 | %       |  | $       | 42.16 |  |  |  | 41.9 | %
|Texas                             |  |           | 47,950  |             |  |             | 25,641  |             |  |          | 53.5 | %           |  |            | 22.5  | %      |  |  | 9,281  |     |  |        | 36.2 | %       |  | $       | 41.12 |  |  |  | 43.8 | %
|California                        |  |           | 19,090  |             |  |             | 11,437  |             |  |          | 59.9 | %           |  |            | 10.0  | %      |  |  | 5,457  |     |  |        | 47.7 | %       |  | $       | 39.46 |  |  |  | 40.3 | %
|                                  |  |           |         |             |  |             |         |             |  |          |      |             |  |            |       |        |  |  |        |     |  |        |      |         |  |         |       |  |  |  |      |  
|Total Systems                     |  |           | 191,845 |             |  |             | 113,938 |             |  |          | 59.4 | %           |  |            | 100.0 | %      |  |  | 47,520 |     |  |        | 41.7 | %       |  | $       | 42.92 |  |  |  | 43.3 | %



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|(1) |  | Homes passed refers to estimates of the number of dwelling units in a
particular community that can be connected to the distribution system
without any further extension of principal transmission lines. Such
estimates are based upon a variety of sources, including billing records,
house counts, city directories and other local sources.                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | The number of basic subscribers has been computed by adding the actual
number of subscribers for all non-bulk accounts and the equivalent
subscribers for all bulk accounts. The number of such equivalent
subscribers has been calculated by dividing aggregate basic service
revenue for bulk accounts by the full basic service rate for the community
in which the account is located.
|   
|   
|   
|   
|(3) |  | Percentage of all basic subscribers based on an aggregate of all Systems.                                                                                                                                                                                                                                                                                                                 
|   
|   
|   
|   
|(4) |  | Premium service units represents the number of subscriptions to premium
channels.                                                                                                                                                                                                                                                                                                         

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|(5) |  | EBITDA represents income (loss) before interest expenses, income taxes,
depreciation and amortization and other non-cash income (expenses). EBITDA
is not intended to represent cash flow from operations or net income as
defined by generally accepted accounting principles and should not be
considered as a measure of liquidity or an alternative to, or more
meaningful than, operating income or operating cash flow as an indication
of the Companys operating performance. EBITDA is included herein because
management believes that certain investors find it a useful tool for
measuring the Companys ability to service its indebtedness. EBITDA margin
represents EBITDA as a percentage of revenue.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The South Carolina/North Carolina/Georgia Region. The South Carolina/North
Carolina/Georgia Region consists of eight headends serving 60,519
subscribers. Four headends, located in Aiken, Greenwood and Clemson, South
Carolina and Statesboro, Georgia, serve 55,795 subscribers or 92.2% of the
total subscribers in the region. The region is currently operated from five
primary local offices located in Aiken, Greenwood, Clemson, Statesboro and
Highlands, North Carolina.

Clemson, South Carolina. The Clemson area systems serve 14,095 subscribers
from two headends. The Clemson system, which is home to Clemson University,
is the largest system, serving 13,866 subscribers. Approximately 98.4% of
the subscribers are served by plant with 450 MHz or better channel capacity.
The Company is culminating an intensive five-year capital plan for the
Clemson area systems which includes the installation of a fiber optic
backbone designed to ultimately support a 750 MHz capacity. The Company began
offering digital television service in the Clemson system during 2000.
Additionally, the Clemson area systems have a strong advertising sales
effort, and their principal office and headend sites are owned by the
Company.

Aiken, South Carolina. The Aiken area systems serve 18,418 subscribers from
three headends. The Aiken headend serves 89.5% of the subscribers, has a 550
MHz channel capacity and is addressable. The Company began offering digital
television service in the Aiken system during 2001. The Aiken area has a
diversified industrial base consisting of local, national and foreign
manufacturing companies covering such diverse industries such as
pharmaceuticals, textiles, industrial robotics, gardening seeds and
prefabricated homes. The largest employer in the Aiken area is the
Westinghouse Savannah River Company. The office and two of the headend sites
are owned by the Company.

Greenwood, South Carolina. The Greenwood system serves 16,844 subscribers
from a single headend and has a minimum of 450 MHz channel capacity. The
Company began the upgrade of the Greenwood system to 550 MHz channel capacity
in 2000, with approximately 64% of the subscribers being served by plant with
550 MHz channel capacity by year-end 2001. Although this system employed
fiber optic technology, the Company has constructed an expansion of the fiber
optic backbone designed to support 860 MHz capacity. Additionally, a fiber
optic backbone interconnect was constructed to the Saluda and Edgefield
systems for future system upgrade and connection. The Company began offering
digital television service in the Greenwood system during 2001. The Greenwood
area has a diversified industrial base consisting of local, national and
foreign manufacturing companies covering such diverse industries such as
pharmaceuticals, photo film textiles, industrial robotics, gardening seeds
and prefabricated homes. The Company owns its office and headend site.

Statesboro, Georgia. The Statesboro system serves 8,594 subscribers from a
single headend with approximately 95% of the subscribers served by 450 MHz
channel capacity. Continued construction of a fiber backbone with ability to
deliver 860 MHz of bandwidth is underway. The Company began offering digital
television service in the Statesboro system during 2000. The Statesboro
system has a strong advertising sales effort and its office and headend site
are owned by the Company. Statesboro is home to Georgia Southern University.

Highlands, North Carolina. The Highlands system serves 2,568 subscribers from
a single headend with approximately 85% of the subscribers served by 330 MHz
channel capacity and 15% served by 450 MHz capacity. Highlands is located on
a plateau of the Blue Ridge Mountains where Georgia, North Carolina and South
Carolina meet. The Highlands area has long been a vacation destination for
affluent families from many Southern cities. The area is encircled by
200,000 acres of the End National Forest. One of the main attractions of
Highlands is the areas exclusive golf clubs. The system experiences
seasonality in its subscriber base, the areas low season (winter) and high
season (summer) fluctuate by approximately 700 basic subscribers.

The Washington Region. The Washington Region serves 16,341 subscribers
from four headends and is operated from two offices located in Port Angeles
and Moses Lake, Washington. The two largest headends serve 12,380
subscribers, or 75.8% of the Companys total subscribers in the region.

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Port Angeles, Washington. The Port Angeles system serves 6,014 subscribers
from one headend. The system utilizes a fiber optic backbone designed to
support a 750 MHz capacity with 65% of the subscribers served by at least 330
MHz capacity plant and 35% served by 550 MHz capacity plant. An ongoing
upgrade of the Port Angeles system to 550 MHz channel capacity began in late
2001. The Company began offering digital television service in the Port
Angeles system during 2000. Port Angeles is located near the Olympic
National Park and is the county seat for Clallam County. The systems office
and headend sites are owned by the Company.

Moses Lake, Washington. The Moses Lake area systems serve 10,328 subscribers
from three headends. The Moses Lake headend serves 61.6% of the subscribers
and was recently upgraded to 450 MHz channel capacity which included the
expansion of the fiber optic backbone designed to support a 750 MHz capacity.
The Company began offering digital television service in the Moses Lake
system during 1999. The office, three headend sites and a microwave site are
owned by the Company. The three headends are interconnected via microwave for
the delivery of certain off-air broadcast signals imported from the Seattle
and Spokane, Washington markets and TVW which is a state version of C-SPAN.
Each system maintains a separate headend facility for reception and
distribution of satellite signals. An upgrade of the Othello system to 450
MHz was recently completed. The Ephrata system is currently being upgraded
to 550 MHz capacity with completion projected by early 2003.

The Texas Region. The Texas Region is characterized by smaller systems,
with 17 headends serving 25,641 subscribers. Eight headends currently serve
82.9% of the subscribers. Additionally, the Companys management structure
allows it to achieve operating efficiencies, as only five local offices are
required to service the region.

Stephenville, Texas. The Stephenville area systems serve 5,778 subscribers
from a cluster of four headends. Stephenville is home to Tarleton State
College, an affiliate of Texas A&M University. All of the subscribers are
currently served by plant with 400 MHz or better channel capacity. The
Company began offering digital television service in the Stephenville system
during 2001. The office and three of the headend sites are owned by the
Company.

Mexia, Texas. The Mexia area systems serve 7,850 subscribers from a cluster
of seven headends, with the two largest headends, Mexia and Fairfield/Teague,
serving 71.5% of the subscribers. Approximately 87.7% of subscribers
currently are serviced by plant with 400 MHz capacity, with the Mexia headend
utilizing a fiber optic backbone. The Company began offering digital
television service in the Mexia system during 2001. The Mexia area has a
diversified economy with Nucor Steel, Inc. as a major employer.

Marble Falls, Texas. The Marble Falls area systems serve 7,258 subscribers
from a cluster of three headends. In June 2000 the Company completed a fiber
optic interconnect of the Burnet system to the Marble Falls system, thereby
eliminating an additional headend. With the completion of the Burnet
interconnect, approximately 80.1% of the subscribers in the area are served
from a single headend. The combination office and headend site in Marble
Falls is owned by the Company. Over the next two to four years the remaining
systems in the Marble Falls area are scheduled to be upgraded to 400 MHz or
550 MHz capacity. The Company began offering digital television service in
the Marble Falls system during 2001. The Marble Falls region is a popular
outdoor recreation and retirement area for families from nearby Austin and
San Antonio.

The remaining three headends in the Texas region serve 4,755 subscribers,
with all of the subscribers served by plant with 400 MHz capacity or better.

The California Region. The California Region serves 11,437 subscribers
from seven headends, which are operated from three offices located in Yreka,
Oakhurst and Mount Shasta, California. Three headends serve 9,956 subscribers
or 87.1% of the total subscribers in the region.

Oakhurst, California. The Oakhurst, California area is one of the entrances
to Yosemite National Park. The Oakhurst area systems serve 4,154 subscribers
from a cluster of five headends. The Oakhurst headend serves 64.4% of the
subscribers in the area. An upgrade of the Oakhurst system to 450 MHz
capacity with approximately 90.0% of the systems subscribers served was
recently completed. The Company began offering digital television service in
the Oakhurst system during 2001. The current upgrade plan includes the
construction of a fiber optic backbone, with the interconnect and subsequent
elimination of one headend.

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Yreka, California. The Yreka, California system, located near Mt. Shasta
National Park, serves 2,970 subscribers from a single headend. Yreka is the
county seat of Siskiyou County. The Yreka system currently has a plant
capacity of 50% 450 MHz, 25% 400 MHz and 25% 330 MHz. An ongoing upgrade of
the system to 450 MHz capacity is in process with completion projected by
year-end 2003. The Company began offering digital television service in the
Yreka system during 2001. The Yreka office and headend sites are owned by
the Company.

Mount Shasta, California. The Mount Shasta, California system, serves 4,313
subscribers from a primary headend and is located in close proximity to the
Companys Yreka system. The system sits at the base of 14,162 foot Mt.
Shasta, which attracts tourists year round with skiing, hiking and golf
courses nearby. The communities of Mount Shasta, Dunsmuir and Weed are
connected by fiber optic backbone and the community of McCloud is connected
via AML microwave. Portions of the system serving approximately 85% of the
subscribers are currently at 330 MHz capacity with the remaining 15% at 550
MHz. The completion of an upgrade to 550 MHz is planned. The Company began
offering digital television service in the Mount Shasta system in 2000. The
Mount Shasta area has a strong economic base. Forestry, forest services and
tourism are the major industries.

As of December 31, 2001, the Company had approximately 179 full-time
employees and 10 part-time employees. Nine of the Companys employees at its
Moses Lake, Washington system are represented by a labor union. The Company
considers its relations with its employees to be good.

The Companys cable television business generally is not considered
seasonal. Its business is not dependent upon a single customer or a few
customers, the loss of any one or more of which would have a material adverse
effect on its business. No customer accounts for 10% or more of revenues. No
material portion of the Companys business is subject to re-negotiation of
profits or termination of contracts or subcontracts at the election of any
governmental unit, except that franchise agreements may be terminated or
modified by the franchising authorities as noted above. During the last year,
the Company did not engage in any research and development activities.

Company revenues are derived primarily from monthly payments received
from cable television subscribers. Subscribers are divided into four
categories: basic subscribers, expanded basic subscribers, premium
subscribers, and digital subscribers. Basic subscribers are households that
subscribe to the basic level of service, which generally provides access to
the three major television networks (ABC, NBC and CBS), a few independent
local stations, PBS (the Public Broadcasting System) and certain satellite
programming services, such as ESPN, CNN or The Discovery Channel. Expanded
basic subscribers are households that subscribe to an additional level of
programming service, the content of which varies from system to system.
Premium subscribers are households that subscribe to one or more pay
channels in addition to the basic service. These pay channels include such
services as Showtime, Home Box Office, Cinemax, The Movie Channel, Encore and
Starz. Digital subscribers are those who subscribe to digitally delivered
video and audio services where offered.

COMPETITION

Cable television systems currently experience competition from several
sources, including broadcast television, cable overbuilds, direct broadcast
satellite services, private cable and multichannel multipoint distribution
service systems. Cable television systems are also in competition in
various degrees with other communications and entertainment media,
including motion pictures, home video cassette recorders, internet data
delivery and internet video delivery. The following provides a summary
description of these sources of competition.

BROADCAST TELEVISION

Cable television systems have traditionally competed with broadcast
television, which consists of television signals that the viewer is able to
receive directly on the viewers television without charge using an off-air
antenna. The extent of this competition is dependent in part upon the quality
and quantity of signals available by antenna reception as compared to the
services provided by the local cable system. Accordingly, cable operators
find it less difficult to obtain higher penetration rates in rural areas
(where signals available off-air are limited) than in metropolitan areas
where numerous, high quality off-air signals are often available without the
aid of cable television systems. The recent licensing of digital spectrum by
the FCC will provide incumbent broadcast licensees with the ability to
deliver high definition television pictures and multiple digital-quality
program streams, as well as advanced digital services such as subscription
video.

6



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OVERBUILDS

Cable television franchises are not exclusive, so that more than one cable
television system may be built in the same area. This is known as an
overbuild. Overbuilds have the potential to result in loss of revenues to
the operator of the original cable television system. Constructing and
developing a cable television system is a capital intensive process, and it
is often difficult for a new cable system operator to create a marketing edge
over the existing system. Generally, an overbuilder would be required to
obtain franchises from the local governmental authorities, although in some
instances, the overbuilder could be the local government itself. In any case,
an overbuilder would be required to obtain programming contracts from
entertainment programmers and, in most cases, would have to build a complete
cable system such as headends, trunk lines and drops to individual
subscribers homes throughout the franchise areas.

Federal cross-ownership restrictions historically limited entry by local
telephone companies into the cable television business. The 1996 Telecom Act
eliminated this cross-ownership restriction. See Regulation and Legislation
below. It is therefore possible for companies with considerable resources to
overbuild existing cable operators and enter the business. Several telephone
companies have begun seeking cable television franchises from local
governmental authorities and constructing cable television systems. The
Company cannot predict at this time the extent of telephone company
competition that will emerge in areas served by the Companys cable
television systems. The entry of electric utility companies into the cable
television business, as now authorized by the 1996 Telecom Act, could have a
similar adverse effect.

DIRECT BROADCAST SATELLITE SERVICE

High powered direct-to-home satellites have made possible the wide-scale
delivery of programming to individuals throughout the United States using
small roof-top or wall-mounted antennas. The two leading DBS providers have
experienced dramatic growth over the last several years and together now
serve over 17 million customers nationwide. Companies offering direct
broadcast satellite service use video compression technology to increase
channel capacity of their systems to more than 200 channels and to provide
packages of movies, satellite networks and other program services which are
competitive to those of cable television systems. DBS companies historically
faced significant legal and technological impediments to providing popular
local broadcast programming to their customers. Recent federal legislation
reduced this competitive disadvantage. Nevertheless, technological
limitations still affect DBS companies, and it is expected that DBS companies
will offer local broadcast programming only in the top 50 to 100 U.S. markets
for the foreseeable future. The availability of DBS equipment at reasonable
prices (often free with promotions), and the relative attractiveness of the
programming options offered by the cable television industry and direct
broadcast satellite competitors will impact the ability of providers of DBS
service to compete successfully with the cable television industry.
Recently, the two leading DBS providers announced their intent to merge into
one DBS provider, which, according to the companies FCC filings, would
enable the merged company to offer services such as local broadcast
programming in all U.S. markets and high-speed Internet access nationwide; if
this merger is approved by both the FCC and Department of Justice, DBS may
become a stronger competitor to the cable television industry.

PRIVATE CABLE

Additional competition is provided by private cable television systems,
known as satellite master antenna television, serving multi-unit dwellings
such as condominiums, apartment complexes, and private residential
communities. These private cable systems may enter into exclusive agreements
with apartment owners and homeowners associations, which may preclude
operators of franchised systems from serving residents of these private
complexes. Operators of private cable, which do not cross public rights of
way, are free from the federal, state and local regulatory requirements
imposed on franchised cable television operators.

MULTICHANNEL MULTIPOINT DISTRIBUTION SERVICE SYSTEMS

Cable television systems also compete with wireless program distribution
services such as multichannel, multipoint distribution service systems,
commonly called wireless cable, which are licensed to serve specific areas.
Multichannel, multipoint distribution service systems use low-power microwave
frequencies to transmit television programming over-the-air to paying
subscribers. This industry is less capital intensive than the cable
television industry, and it is therefore more practical to construct systems
using this technology in areas of lower subscriber penetration.

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REGULATION AND LEGISLATION

SUMMARY

The following summary addresses the key regulatory developments and
legislation affecting the cable television industry. Other existing federal
legislation and regulations, copyright licensing and, in many jurisdictions,
state and local franchise requirements are currently the subject of a variety
of judicial proceedings, legislative hearings and administrative and
legislative proposals which could change, in varying degrees, the manner in
which cable television systems operate. Neither the outcome of these
proceedings nor their impact upon the cable television industry or the
Company can be predicted at this time.

The Company expects to adapt its business to adjust to the changes that may
be required under any scenario of regulation. At this time, the Company
cannot assess the effects, if any, that present regulation may have on the
Companys operations and potential appreciation of its Systems. There can be
no assurance that the final form of regulation will not have a material
adverse impact on the Companys operations.

The operation of a cable system is extensively regulated by the FCC, some
state governments and most local governments. The 1996 Telecommunications Act
has altered the regulatory structure governing the nations communications
providers. It removes barriers to competition in both the cable television
market and the local telephone market. Among other things, it also reduces
the scope of cable rate regulation and encourages additional competition in
the video programming industry by allowing local telephone companies to
provide video programming in their own telephone service areas.

The 1996 Telecommunications Act requires the FCC to undertake a host of
implementing rulemakings. Moreover, Congress and the FCC have frequently
revisited the subject of cable regulation. Future legislative and regulatory
changes could adversely affect the Companys operations.

CABLE RATE REGULATION

The 1992 Cable Act imposed an extensive rate regulation regime on the cable
television industry, which limited the ability of cable companies to increase
subscriber fees. Under that regime, all cable systems were subject to rate
regulation, unless they face effective competition in their local franchise
area. Federal law now defines effective competition on a community-specific
basis as requiring satisfaction of conditions rarely satisfied in the current
marketplace, although this may change in light of emerging DBS competition.

Although the FCC established the underlying regulatory scheme, local
government units, commonly referred to as local franchising authorities, are
primarily responsible for administering the regulation of the lowest level of
cable service called the basic service tier. The basic service tier typically
contains local broadcast stations and public, educational, and government
access channels. Before a local franchising authority begins basic service
rate regulation, it must certify to the FCC that it will follow applicable
federal rules. Many local franchising authorities have voluntarily declined
to exercise their authority to regulate basic service rates. Local
franchising authorities also have primary responsibility for regulating cable
equipment rates. Under federal law, charges for various types of cable
equipment must be unbundled from each other and from monthly charges for
programming services.

As of December 31, 2001, approximately 10% of the Companys local franchising
authorities were certified to regulate basic tier rates. The 1992 Cable Act
permits communities to certify and regulate rates at any time, so that it is
possible that additional localities served by the systems may choose to
certify and regulate rates in the future.

The FCC itself historically administered rate regulation of cable
programming service tiers, which represent the expanded level of packaged,
non-premium, programming services typically containing satellite-delivered
programming. The FCCs authority, however, with respect to smaller operators
like the Company ended in 1996.

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Under the rate regulations of the FCC, most cable systems were required
to reduce their basic service tier and cable programming service tier rates
in 1993 and 1994, and have since had their rate increases governed by a
complicated price cap scheme that allows for the recovery of inflation and
certain increased costs, as well as providing some incentive for expanding
channel carriage. The FCC has modified its rate adjustment regulations to
allow for annual rate increases and to minimize previous problems associated
with regulatory lag. Operators also have the opportunity to bypass this
benchmark regulatory scheme in favor of traditional cost-of-service
regulation in cases where the latter methodology appears favorable. Cost of
service regulation is a traditional form of rate regulation, under which a
utility is allowed to recover its costs of providing the regulated service,
plus a reasonable profit. In a particular effort to ease the regulatory
burden on small cable systems, the FCC created special rate rules applicable
for systems with fewer than 15,000 subscribers owned by an operator with
fewer than 400,000 subscribers. The special rate rules allow for a simplified
cost-of-service showing. All of the Companys systems are eligible for these
simplified cost-of-service rules (two pursuant to waivers granted by the
FCC), and have calculated rates generally in accordance with those rules. To
the extent the Companys systems remain rate regulated on the basic service
tier, this regulatory option affords the Company significant regulatory
options.

The FCC and Congress have provided various forms of rate relief for
smaller cable systems owned by smaller operators. Premium cable services
offered on a per-channel or per-program basis remain unregulated, as do
affirmatively marketed packages consisting entirely of new programming
product. However, federal law requires that the basic service tier be offered
to all cable subscribers and limits the ability of operators to require
purchase of any cable programming service tier if a customer seeks to
purchase premium services offered on a per-channel or per-program basis,
subject to a technology exception which sunsets in October 2002.

Regulation by the FCC of cable programming service tier rates for all
systems, regardless of size, sunset pursuant to the 1996 Telecom Act on March
31, 1999. Certain legislators, however, have called for new rate regulations
if unregulated cost rates increase dramatically. Should this occur, all rate
deregulation including that applicable to small operators like the Company
could be jeopardized. The 1996 Telecom Act also relaxes existing uniform
rate requirements by specifying that uniform rate requirements do not apply
where the operator faces effective competition, and by exempting bulk
discounts to multiple dwelling units, although complaints about predatory
pricing still may be made to the FCC.

CABLE ENTRY INTO TELECOMMUNICATIONS

The 1996 Telecom Act creates a more favorable environment for us to
provide telecommunications services beyond traditional video delivery. It
provides that no state or local laws or regulations may prohibit or have the
effect of prohibiting any entity from providing any interstate or intrastate
telecommunications service. A cable operator is authorized under the 1996
Telecom Act to provide telecommunications services without obtaining a
separate local franchise. States are authorized, however, to impose
competitively neutral requirements regarding universal service, public
safety and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way
and may require reasonable, competitively neutral compensation for management
of the public rights-of-way when cable operators provide telecommunications
service. The favorable pole attachment rates afforded cable operators under
federal law can be gradually increased by utility companies owning the poles,
beginning in 2001, if the operator provides telecommunications service, as
well as cable service, over its plant.

INTERNET SERVICE

There is at present no significant federal regulation of cable system
delivery of Internet services. So far, cable operators are experiencing many
victories where regulation is attempted. For example, many local
franchising authorities were unsuccessful in their attempts to impose
mandatory Internet access requirements as part of cable franchise renewals or
transfers. A federal district court in Portland, Oregon upheld the legal
ability of local franchising authority to impose these types of conditions,
but such ruling was reversed by the Ninth Circuit Court of Appeals.
Additionally, In March 2002, the FCC adopted a Declaratory Ruling,concluding
that cable modem service is properly classified as an interstate information
service and is therefore subject to FCC jurisdiction. For now, this leaves
cable modem service exempt from open access requirements. However, the FCC
simultaneously adopted a Notice of Proposed Rulemakingto determine whether,
in light of marketplace developments, it is necessary or appropriate at this
time to require access over cable systems by multiple Internet service
providers, and whether (and to what extent) cable modem service should be
regulated by state and local franchising authorities. Any increased
regulation could burden the capacity of cable systems and complicate any
plans the Company may have or develop for providing Internet service.

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Many utilities were unsuccessful in attempting to impose unduly burdensome
pole attachment rental fees for cable operators provision of Internet access
services when the U.S. Supreme Court recently ruled that cable television
systems may deliver high-speed Internet access and remain within the
protections of Section 703 of the Telecommunications Act of 1996 (the Pole
Attachment Act). National Cable & Telecommunications Assoc. v. Gulf Power
Co., Nos. 00-832 and 00-843, 534 U.S. (January 16, 2002). The U.S. Supreme
Court reversed the Eleventh Circuits decision to the contrary and sustained
the FCC decision that applied the Pole Attachment Acts rate formula and
other regulatory protections to cable television systems attachments over
which commingled cable television and cable modem services are provided.

TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION

The 1996 Telecom Act allows telephone companies to compete directly with
cable operators by repealing the historic telephone company/cable
cross-ownership ban. Local exchange carriers, including the regional
telephone companies, can now compete with cable operators both inside and
outside their telephone service areas with certain regulatory safeguards.
Because of their resources, local exchange carriers could be formidable
competitors to traditional cable operators. Various local exchange carriers
currently are providing video programming services within their telephone
service areas through a variety of distribution methods, including both the
deployment of broadband wire facilities and the use of wireless transmission.

Under the 1996 Telecom Act, local exchange carriers or any other cable
competitor providing video programming to subscribers through broadband wire
should be regulated as a traditional cable operator, subject to local
franchising and federal regulatory requirements, unless the local exchange
carrier or other cable competitor elects to deploy its broadband plant as an
open video system. To qualify for favorable open video system status, the
competitor must reserve two-thirds of the systems activated channels for
unaffiliated entities. The Fifth Circuit Court of Appeals reversed certain of
the FCCs open video system rules, including its preemption of local
franchising. The FCC revised its OVS rules to eliminate this general
preemption, thereby leaving franchising discretion to local and state
authorities. It is unclear what effect this ruling will have on entities
pursuing open video system operation.

Although local exchange carriers and cable operators can now expand their
offerings across traditional service boundaries, the general prohibition
remains on local exchange carrier buyouts of co-located cable systems.
Co-located cable systems are cable systems serving an overlapping territory.
Cable operator buyouts of co-located local exchange carrier systems, and
joint ventures between cable operators and local exchange carriers in the
same market also are prohibited. The 1996 Telecom Act provides a few limited
exceptions to this buyout prohibition, including a carefully circumscribed
rural exemption. The 1996 Telecom Act also provides the FCC with the
limited authority to grant waivers of the buyout prohibition.

ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION

The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services, including cable
television, notwithstanding the Public Utility Holding Company Act. Electric
utilities must establish separate subsidiaries, known as exempt
telecommunications companies and must apply to the FCC for operating
authority. Like telephone companies, electric utilities have substantial
resources at their disposal, and could be formidable competitors to
traditional cable systems. Several of these utilities have been granted broad
authority by the FCC to engage in activities which could include the
provision of video programming.

ADDITIONAL OWNERSHIP RESTRICTIONS

The 1996 Telecom Act eliminates statutory restrictions on
broadcast/cable cross-ownership, including broadcast network/cable
restrictions, but leaves in place existing FCC regulations prohibiting local
cross-ownership between co-located television stations and cable systems.
However, in February 2002, the U.S. Court of Appeals for the D.C. Circuit
found such local cross-ownership rule to be unlawful and vacated such rule.
The 1996 Telecommunications Act also eliminates the three year holding period
required under the 1992 Cable Acts anti-trafficking provision. The 1996
Cable Act leaves in place existing restrictions on cable cross-ownership with
satellite master antenna television and multichannel multipoint distribution
service facilities, but lifts those restrictions where the cable operator is
subject to effective competition. FCC regulations permit cable operators to
own and operate satellite master antenna television systems within their
franchise area, provided that their operation is consistent with local cable
franchise requirements.

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Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national video program services. Although the 1992
Cable Act also precluded any cable operator from serving more than 30% of all U.S.
domestic cable subscribers, this provision was stayed pending further
judicial review and FCC rulemaking. In May 2000, the U.S. Court of Appeals
for the D.C. Circuit struck down both of these provisions. The FCC is now
considering whether it can fashion new such laws to withstand judicial
review.

MUST CARRY/RETRANSMISSION CONSENT

The 1992 Cable Act contains broadcast signal carriage requirements. Broadcast
signal carriage is the transmission of broadcast television signals over a
cable system to cable customers. These requirements, among other things,
allow local commercial television broadcast stations to elect once every
three years between a must carry status or a retransmission consent
status; the next such three-year period commencing January 1, 2003 and ending
December 31, 2005. Less popular stations typically elect must carry, which is
the broadcast signal carriage requirement that allows local commercial
television broadcast stations to require a cable system to carry the station.
More popular stations, such as those affiliated with a national network,
typically elect retransmission consent, which is the broadcast signal
carriage requirement that allows local commercial television broadcast
stations to negotiate for payments for granting permission to the cable
operator to carry the stations. Must carry requests can dilute the appeal of
a cable systems programming offerings because a cable system with limited
channel capacity may be required to forego carriage of popular channels in
favor of less popular broadcast stations electing must carry. Retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse effect on the Companys business.

To date, compliance with the retransmission consent and must carry
provisions of the 1992 Cable Act has not had a material effect on the
Company, although these provisions may affect the operations of the Company
in the future, depending on factors as market conditions, the implementation
of digital broadcasts, channel capacity and similar matters when these
arrangements are renegotiated.

The burden associated with must carry may increase substantially if
broadcasters proceed with conversion to digital transmission and the FCC
determines that cable systems must carry all analog and digital broadcasts in
their entirety. This burden would reduce capacity available for more popular
video programming and new Internet and telecommunication offerings. The FCC
initially ruled against the imposition of dual digital and analog must
carry rules, but is conducting a further factual inquiry into whether such
rules should be promulgated.

ACCESS CHANNELS

Local franchising authorities can include franchise provisions requiring
cable operators to set aside certain channels for public, educational and
governmental access programming. Federal law also requires cable systems to
designate a portion of their channel capacity, up to 15% in some cases, for
commercial leased access by unaffiliated third parties. The FCC has adopted
rules regulating the terms, conditions and maximum rates a cable operator may
charge for commercial leased access use. We believe that requests for
commercial leased access carriages have been relatively limited.

ACCESS TO PROGRAMMING

To spur the development of independent cable programmers and competition to
incumbent cable operators, the 1992 Cable Act imposed restrictions on the
dealings between cable operators and cable programmers. Of special
significance from a competitive business posture, the 1992 Cable Act
precludes video programmers affiliated with cable companies from favoring
their cable operators over new competitors and requires these programmers to
sell their programming to other multichannel video distributors. This
provision limits the ability of vertically integrated cable programmers to
offer exclusive programming arrangements to cable companies. This
prohibition is scheduled to sunset in October 2002, subject to FCC review.
There also has been interest expressed in further restricting the marketing
practices of cable programmers, including subjecting programmers who are not
affiliated with cable operators to all of the existing program access
requirements, and subjecting terrestrially delivered programming to the
program access requirements. Terrestrially delivered programming is
programming delivered other than by satellite. These changes should not have
a dramatic impact on the Company, but would limit potential competitive
advantages the Company enjoys.

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INSIDE WIRING; SUBSCRIBER ACCESS

In an order issued in 1997, the FCC established rules that require an
incumbent cable operator upon expiration of a multiple dwelling unit service
contract to sell, abandon, or remove home run wiring that was installed by
the cable operator in a multiple dwelling unit building. These inside wiring
rules are expected to assist building owners in their attempts to replace
existing cable operators with new programming providers who are willing to
pay the building owner a higher fee, where this fee is permissible. The FCC
has also proposed abrogating all exclusive multiple dwelling unit service
agreements held by incumbent operators, but allowing such contracts when held
by new entrants. In another proceeding, the FCC has preempted restrictions on
the deployment of private antenna on rental property within the exclusive use
of a tenant, such as balconies and patios. This ruling by the FCC may limit
the extent to which we along with multiple dwelling unit owners may enforce
certain aspects of multiple dwelling unit agreements which otherwise
prohibit, for example, placement of digital broadcast satellite receiver
antennae in multiple dwelling unit areas under the exclusive occupancy of a
renter. These developments may make it even more difficult for us to provide
service in multiple dwelling unit complexes.

OTHER REGULATIONS OF THE FEDERAL COMMUNICATIONS COMMISSION

In addition to the FCC regulations noted above, there are other FCC
regulations covering such areas as:



| |  | equal employment opportunity,                        
|- |  | -----------------------------------------------------
| 
| |  | subscriber privacy,                                  
| 
| |  | programming practices, including, among other things,



| |  |  | syndicated program exclusivity            
| | - |  | ------------------------------------------
|
| |  |  | network program nonduplication,           
|
| |  |  | local sports blackouts,                   
|
| |  |  | indecent programming,                     
|
| |  |  | lottery programming,                      
|
| |  |  | political programming,                    
|
| |  |  | sponsorship identification,               
|
| |  |  | childrens programming advertisements, and
|
| |  |  | closed captioning,                        



| |  |  registration of cable systems and facilities licensing,    
| |  | -------------------------------------------------------------
|
| |  |  maintenance of various records and public inspection files,
|
| |  |  aeronautical frequency usage,                              
|
| |  |  lockbox availability,                                      
|
| |  |  antenna structure notification,                            
|
| |  |  tower marking and lighting,                                
|
| |  |  consumer protection and customer service standards,        
|
| |  |  technical standards,                                       

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| |  |  consumer electronics equipment compatibility, and
| |  | ---------------------------------------------------
|
| |  |  emergency alert systems.                         

The FCC recently ruled that cable customers must be allowed to purchase
cable converters from third parties and established a multi-year phase-in
during which security functions, which would remain in the operators
exclusive control, would be unbundled from basic converter functions, which
could then be satisfied by third party vendors.

The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders
and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
used in connection with cable operations.

COPYRIGHT

Cable television systems are subject to federal copyright licensing
covering carriage of television and radio broadcast signals. In exchange for
filing certain reports and contributing a percentage of their revenues to a
federal copyright royalty pool, cable operators can obtain blanket permission
to retransmit copyrighted material included in broadcast signals. The
possible modification or elimination of this compulsory copyright license is
the subject of continuing legislative review and could adversely affect the
Companys ability to obtain desired broadcast programming. We cannot predict
the outcome of this legislative activity. Copyright clearances for
nonbroadcast programming services are arranged through private negotiations.

Cable operators distribute locally originated programming and
advertising that use music controlled by major music performing rights
organizations, such as Broadcast Music, Inc. (BMI). The cable industry has
had a long series of negotiations and adjudications with certain of such
organizations. The Company recently entered into an agreement with BMI
setting forth, among other things, an agreed upon rate through 2004.
Although we cannot predict the ultimate outcome of other industry proceedings
or the amount of any license fees the Company may be required to pay for past
and future use of association-controlled music, we do not believe these
license fees will be significant to the Companys business and operations.

STATE AND LOCAL REGULATION

Cable television systems generally are operated pursuant to nonexclusive
franchises granted by a municipality or other state or local government
entity in order to cross public rights-of-way. Federal law now prohibits
local franchising authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises. Cable franchises
generally are granted for fixed terms and in many cases include monetary
penalties for non-compliance and may be terminable if the franchisee failed
to comply with material provisions.

The specific terms and conditions of franchises vary materially between
jurisdictions. Each franchise generally contains provisions governing cable
operations, service rates, franchising fees, system construction and
maintenance obligations, system channel capacity, design and technical
performance, customer service standards, and indemnification protections. A
number of states, including Connecticut, subject cable systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulation of a character similar to that of a public utility. Although local
franchising authorities have considerable discretion in establishing
franchise terms, there are certain federal limitations. For example, local
franchising authorities cannot insist on franchise fees exceeding 5% of the
systems gross cable-related revenues, cannot dictate the particular
technology used by the system, and cannot specify video programming other
than identifying broad categories of programming.

Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the local franchising authority may seek to impose new and more
onerous requirements such as significant upgrades in facilities and service
or increased franchise fees as a condition of renewal. Similarly, if a local
franchising authoritys consent is required for the purchase or sale of a
cable system or franchise, the local franchising authority may attempt to
impose more burdensome or onerous franchise requirements in connection with a
request for consent. Historically, most franchises have been renewed for and
consents granted to cable operators that have provided satisfactory services
and have complied with the terms of their franchise.

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Under the 1996 Telecom Act, cable operators are not required to obtain
franchises for the provision of telecommunications services, and local
franchising authorities are prohibited from limiting, restricting, or
conditioning the provision of these services. In addition, local franchising
authorities may not require a cable operator to provide any
telecommunications service or facilities, other than institutional networks
under certain circumstances, as a condition of an initial franchise grant, a
franchise renewal, or a franchise transfer. The 1996 Telecom Act also
provides that franchising fees are limited to an operators cable-related
revenues and do not apply to revenues that a cable operator derives from
providing new telecommunications services.




ITEM 2. PROPERTIES

The Companys cable television systems are located in and around
Stephenville, Marble Falls, Crockett, Mexia and Navasota, Texas; Moses Lake
and Port Angeles, Washington; Clemson, Aiken and Greenwood, South Carolina;
Highlands, North Carolina; Statesboro, Georgia; and Yreka, Mount Shasta and
Oakhurst, California.

A cable television system consists of three principal operating
components. The first component, known as the headend, receives television,
radio and information signals generally by means of special antennas and
satellite earth stations. The second component, the distribution network,
which originates at the headend and extends throughout the systems service
area, consists of microwave relays, coaxial or fiber optic cables and
associated electronic equipment placed on utility poles or buried
underground. The third component of the system is a drop cable, which
extends from the distribution network into each customers home and connects
the distribution system to the customers television set. An additional
component used in certain systems is the home terminal device, or converter,
that expands channel capacity to permit reception of more than twelve
channels of programming on a non-cable ready television set.

The Companys principal physical assets consist of cable television
systems, including signal-receiving, encoding and decoding apparatus,
headends, distribution systems and subscriber house drop equipment for each
of its systems. The signal receiving apparatus typically includes a tower,
antennas, ancillary electronic equipment and earth stations for reception of
satellite signals. Headends, consisting of associated electronic equipment
necessary for the reception, amplification and modulation of signals,
typically are located near the receiving devices. The Companys distribution
systems consist primarily of coaxial cable and related electronic equipment.
As upgrades are completed, the systems will generally incorporate fiber optic
cable. Subscriber equipment consists of traps, house drops and, in some
cases, converters. The Company owns its distribution systems, various office
fixtures, test equipment and certain service vehicles. The physical
components of the systems require maintenance and periodic upgrading to keep
pace with technological advances.

The Companys cables are generally attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in trenches or placed in underground ducts. The
FCC regulates most pole attachment rates under the federal Pole Attachment
Act although in certain cases attachment rates are regulated by state law.

The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave complexes and business
offices. The Company believes that its properties, both owned and leased, are
in good condition and are suitable and adequate for the Companys business
operations as presently conducted.




ITEM 3. 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 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.

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PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  There is no established public trading market for the Companys common
equity.

(b)  The Company has one common equity holder as of December 31, 2001.

(c)  During 2001, the Company did not pay cash dividends and has no
intentions of paying cash dividends in the foreseeable future, due to
restrictions in its loan agreement.




ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data as of and for the years ended December
31, 2000 December 31, 1999 have been derived from our financial statements
audited by Arthur Andersen LLP, independent accountants. Additionally, the
following selected financial data as of and for the year ended December 31,
2001 has been derived from our financial statements audited by KPMG LLP,
independent accountants. These historical results are not necessarily
indicative of the results of operations to be expected for any future period.

The data set forth below should be read
in conjunction with Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations and the consolidated financial
statements included in Item 8. Financial Statements and Supplementary Data.
The selected financial data as of and for the year ended December 31, 2001
has been restated to reflect the effects of the correction described in Note
2 to the consolidated financial statements.

|                         |                        |            |                          |   |      |   |             |   |      |   |             |   |  |   |             |   |  |   |             |   | 
|------------------------ | ---------------------- | ---------- | ------------------------ | - | ---- | - | ----------- | - | ---- | - | ----------- | - |  | - | ----------- | - |  | - | ----------- | - | 
|                         |                        |            | Years ended December 31,
|                         |                        |            |                         
|                         |                        |            | 2001                     |   | 2000 |   | 1999        |   | 1998 |   | 1997       
|                         |                        |            |                          |   |      |   |             |   |      |   |            
|                         |                        |            | (restated)               |   |      |   |             |   |      |   |             |   |  |   |             |   |  |   |            
|                         | SUMMARY OF OPERATIONS: |            |                          |   |      |   |             |   |      |   |             |   |  |   |             |   |  |   |             |   | 
|Revenue                  |                        | $          | 62,067,659               |   |      | $ | 60,507,984  |   |      | $ | 58,848,415  |   |  | $ | 56,002,667  |   |  | $ | 39,517,808  |  
|Operating income         |                        |            | 6,141,037                |   |      |   | 6,376,758   |   |      |   | 6,561,172   |   |  |   | 4,655,761   |   |  |   | 4,588,563   |  
|Net loss                 |                        |            | (1,864,718               | ) |      |   | (14,268,443 | ) |      |   | (11,776,281 | ) |  |   | (7,758,291  | ) |  |   | (5,550,635  | )
|Total comprehensive loss |                        |            | (1,596,718               | ) |      |   | (14,268,443 | ) |      |   | (11,776,281 | ) |  |   | (7,758,291  | ) |  |   | (5,550,635  | )
|                        
|                         |                        |            | December 31,            
|                         |                        |            |                         
|                         |                        |            | 2001                     |   |      |   | 2000        |   |      |   | 1999        |   |  |   | 1998        |   |  |   | 1997        |  
|                         |                        |            |                          |   |      |   |             |   |      |   |             |   |  |   |             |   |  |   |             |  
|                         |                        | (restated) |                          |   |      |   |             |   |      |   |             |   |  |   |             |   |  |  
|                         | BALANCE SHEET DATA:    |            |                          |   |      |   |             |   |      |   |             |   |  |   |             |   |  |   |             |   | 
|Total assets             |                        | $          | 125,926,194              |   |      | $ | 135,997,674 |   |      | $ | 141,985,167 |   |  | $ | 156,586,254 |   |  | $ | 92,421,978  |  
|Notes payable            |                        |            | 171,031,182              |   |      |   | 182,540,000 |   |      |   | 175,090,000 |   |  |   | 177,340,000 |   |  |   | 107,962,513 |  
|Total liabilities        |                        |            | 182,748,509              |   |      |   | 192,022,121 |   |      |   | 183,741,171 |   |  |   | 186,565,977 |   |  |   | 114,643,410 |  
|Shareholders deficit    |                        |            | (56,822,315              | ) |      |   | (56,024,447 | ) |      |   | (41,756,004 | ) |  |   | (29,979,723 | ) |  |   | (22,221,432 | )

Increases in 1998 Selected Financial Data were primarily attributable to
the January 1998 acquisition of cable television systems serving
approximately 35,700 basic subscribers in portions of Aiken, Greenwood,
McCormick, Laurens, Abbeville, Saluda and Edgefield Counties in western South
Carolina.

|                                          |  |                |             |            |  |            |             |            |  |              |             |               |  |          |             |           |  |   |             |   |  |   |             |   |  |   |             |   |  |   |             |  
|----------------------------------------- |  | -------------- | ----------- | ---------- |  | ---------- | ----------- | ---------- |  | ------------ | ----------- | ------------- |  | -------- | ----------- | --------- |  | - | ----------- | - |  | - | ----------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                          |  | Quarters Ended
|                                          |  |               
|                                          |  | December 31,   |             | September  |  | June 30,   |             | March 31,  |  | December 31, |             | September 30, |  | June 30, |             | March 31,
|                                          |  | 2001           |             | 30, 2001   |  | 2001       |             | 2001       |  | 2000         |             | 2000          |  | 2000     |             | 2000     
|                                          |  |                |             |            |  |            |             |            |  |              |             |               |  |          |             |          
|                                          |  | (restated)     |             | (restated) |  | (restated) |             | (restated) |  |              |             |               |  |          |             |           |  |   |             |   |  |   |             |  
|Revenue                                   |  | $              | 15,683,176  |            |  | $          | 15,454,301  |            |  | $            | 15,524,527  |               |  | $        | 15,405,655  |           |  | $ | 15,280,646  |   |  | $ | 15,231,471  |   |  | $ | 15,155,858  |   |  | $ | 14,840,009  |  
|Operating income                          |  |                | 1,206,240   |            |  |            | 1,502,413   |            |  |              | 1,710,917   |               |  |          | 1,721,467   |           |  |   | 1,667,157   |   |  |   | 1,668,039   |   |  |   | 1,635,233   |   |  |   | 1,406,329   |  
|Gain (loss) on sale
of assets             |  |                | 12,731,008  |            |  |            | 43,704      |            |  |              | (12,194     | )             |  |          | (3,189      | )         |  |   | (443,263    | ) |  |   | (94,425     | ) |  |   | (57,834     | ) |  |   | 5,366       |  
|Net income (loss)                         |  | $              | 9,337,234   |            |  | $          | (3,238,976  | )          |  | $            | (3,003,921  | )             |  | $        | (4,959,055  | )         |  | $ | (3,476,943  | ) |  | $ | (4,975,331  | ) |  | $ | (2,856,204  | ) |  | $ | (2,959,965  | )
|Investment in cable
television properties |  | $              | 118,921,405 |            |  | $          | 127,818,946 |            |  | $            | 126,589,660 |               |  | $        | 128,447,399 |           |  | $ | 129,527,197 |   |  | $ | 131,909,666 |   |  | $ | 134,727,459 |   |  | $ | 136,665,399 |  

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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESTATED FINANCIAL STATEMENTS

In July of 2002, management of Northland Cable Television, Inc. and
Subsidiary (the Company) became aware of a misclassification in the
Companys financial statements as of, and for the year ended December
31, 2001, the quarterly periods within 2001 and for the quarter ended
March 31, 2002. The misclassification relates to the implementation of
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
for Derivative Instruments and Hedging Activity, on January 1, 2001 for
those interest rate swap agreements that existed at implementation.
Correction of this misclassification resulted in the initial
reclassification in the first quarter of 2001 of a non-cash item from
the Companys statement of operations to other comprehensive income in
2001, and included as accumulated other comprehensive income, a
component of shareholders deficit. Subsequent to the initial
reclassification, the reclassified item is thereafter recorded in the
restated statements of operations through the third quarter of 2002.
This correction has no impact on income from operations, earnings before
interest, taxes, depreciation and amortization (EBITDA) or the Companys
calculations of or compliance with the restrictive covenants under the
terms of its loan agreement for the periods affected, nor does it affect
total shareholders deficit at any date.

As of January 1, 2001 the Company had two interest rate swap agreements that
expired in August of 2002. Upon implementation of SFAS No. 133, the Company
recognized $689,000 as a non-cash, cumulative effect of change in accounting
principle in its statement of operations, which represented the fair market
value of these interest rate swap agreements at January 1, 2001. This amount
should have been classified as a component of accumulated other comprehensive
income on the balance sheet upon implementation, and then be amortized into
earnings over the remaining term of the swap agreements.

Management and the Board of Directors of the Company concluded that it was in
the best interest of the Company to reissue the financial statements for the
periods affected by this misclassification, and the financial statements
presented in this filing have been restated as follows to correct for this
matter:

|                           |                                             |                             |             |                   |             |             |             |             |             |  
|-------------------------- | ------------------------------------------- | --------------------------- | ----------- | ----------------- | ----------- | ----------- | ----------- | ----------- | ----------- | -
|                           |                                             |                             |             | December 31, 2001
|                           |                                             |                             |             |                  
|                           |                                             |                             |             | As Reported       |             | As Restated
|                           |                                             |                             |             |                   |             |            
|BALANCE SHEET INFORMATION: |                                             |                             |             |                   |             |             |             |            
|Total assets               |                                             | $                           | 125,926,194 |                   |             | $           | 125,926,194 |            
|                           |                                             |                             |             |                   |             |             |             |            
|Total liabilities          |                                             | $                           | 182,748,509 |                   |             | $           | 182,748,509 |            
|                           |                                             |                             |             |                   |             |             |             |            
|Shareholders deficit:      |                                             |                             |             |                   |             |             |             |            
|                           | Common stock and additional paid in capital |                             |             | 12,359,377        |             |             |             | 12,359,377  |            
|                           | Accumulated deficit                         |                             |             | (69,181,692       | )           |             |             | (69,449,692 | )          
|                           | Accumulated other comprehensive income      |                             |             |                  |             |             |             | 268,000     |            
|                           |                                             |                             |             |                   |             |             |             |            
|                           |                                             | Total shareholders deficit |             | $                 | (56,822,315 | )           |             | $           | (56,822,315 | )
|                           |                                             |                             |             |                   |             |             |             |            

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|                                                                                           |                                                                                                      |                            |            |                             |   |             |            |          |         | 
|------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | --------------------------- | - | ----------- | ---------- | -------- | ------- | 
|                                                                                           |                                                                                                      |                            |            | For the year ended December
|                                                                                           |                                                                                                      |                            |            | 31, 2001                   
|                                                                                           |                                                                                                      |                            |            |                            
|                                                                                           |                                                                                                      |                            |            | As Reported                 |   | As Restated
|                                                                                           |                                                                                                      |                            |            |                             |   |            
|INCOME STATEMENT INFORMATION:                                                              |                                                                                                      |                            |            |                             |   |             |            |         
|Service revenues                                                                           |                                                                                                      | $                          | 62,067,659 |                             |   | $           | 62,067,659 |         
|Income from operations                                                                     |                                                                                                      |                            | 6,141,037  |                             |   |             | 6,141,037  |         
|Unrealized loss on interest rate swaps                                                     |                                                                                                      |                            | (2,608,587 | )                           |   |             | (2,187,587 | )       
|Net loss before cumulative effect of change in accounting
principle and extraordinary item |                                                                                                      |                            | (2,285,718 | )                           |   |             | (1,864,718 | )       
|Cumulative effect of change in accounting principle                                        |                                                                                                      |                            | 689,000    |                             |   |             |           |         
|                                                                                           |                                                                                                      |                            |            |                             |   |             |            |         
|Net loss                                                                                   |                                                                                                      |                            | (1,596,718 | )                           |   |             | (1,864,718 | )       
|                                                                                           |                                                                                                      |                            |            |                             |   |             |            |         
|Other comprehensive income:                                                                |                                                                                                      |                            |            |                             |   |             |            |         
|                                                                                           | Cumulative effect of change in accounting principle                                                  |                            |            |                            |   |             |            | 689,000  |        
|                                                                                           | Reclassification of accumulated other
comprehensive income to unrealized loss on
interest rate swaps |                            |            |                            |   |             |            | (421,000 | )      
|                                                                                           |                                                                                                      |                            |            |                             |   |             |            |         
|                                                                                           |                                                                                                      | Other comprehensive income |            |                             |  |             |            |          | 268,000 | 
|                                                                                           |                                                                                                      |                            |            |                             |   |             |            |         
|Total comprehensive loss                                                                   |                                                                                                      | $                          | (1,596,718 | )                           |   | $           | (1,596,718 | )       
|                                                                                           |                                                                                                      |                            |            |                             |   |             |            |         

CRITICAL ACCOUNTING POLICIES

The Company has three critical accounting policies, which have been chosen
among alternatives that require a more significant amount of management
judgment than other accounting policies the Company employs. They are
described below.

REVENUE RECOGNITION

Cable television service revenue, including service 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.

ALLOCATION OF COST OF PURCHASED CABLE TELEVISION SYSTEMS

Cable television system acquisitions are accounted for as purchase
transactions and their cost is allocated first, to the estimated fair market
value of net tangible assets acquired; then to noncompetition agreements,
franchise agreements and other identifiable intangible costs. Any excess is
allocated to goodwill.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Costs of additions and substantial improvements to property and equipment are
capitalized. Expenditures for maintenance and repairs are charged
to operating expense as incurred. Depreciation is computed using the
straight-line method over the equipments estimated useful lives. The Company
evaluates the depreciation periods of property and equipment to determine
whether events or circumstances warrant revised estimates of useful lives.

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The costs associated with the construction of cable transmission and
distribution facilities and new cable service installations are capitalized.
Costs include direct labor and materials as well as certain indirect costs.
The amount of indirect costs that are capitalized, which include employee
benefits, travel and other costs, are estimated based on historical
construction costs. The Company periodically performs evaluations of these
estimates to determine whether they are reflective of current construction
costs. At the time of retirements, sales or other dispositions of property,
the original cost and related accumulated depreciation are removed from the
respective accounts, and the gains and losses are presented in the statement
of operations and comprehensive loss.

RESULTS OF OPERATIONS

2001 AND 2000

Basic subscribers decreased 10,356 or 8.3%, from 124,294 at December 31, 2000
to 113,938 at December 31, 2001. On a pro forma basis, excluding the effects
of system sales and acquisitions, basic subscribers decreased 4.8%, from
119,721 at December 31, 2000 to 113,938 at December 31, 2001.

Revenues increased $1.6 million or 2.6%, from $60.5 million to $62.1 million
in 2001. Average monthly revenue per basic subscriber increased $2.64 or
6.6%, from $40.28 to $42.92 for the year ended December 31, 2001. Such
increase was attributable to: (i) rate increases implemented in a majority
of the Companys systems during the year; (ii) revenue from the increase in
penetration of new product tiers; and (iii) the Highlands, North Carolina
acquisition which accounted for approximately $321,000 of the 2001 revenue
increase. On a pro forma basis, adjusting for the acquisition of the
Highlands, NC System and the disposition of the Bainbridge, WA system: (i)
revenues would have increased $1.1 million or 1.9%, from $58.5 million to
$59.6 million; and (ii) revenue per average basic subscriber would have
increased $2.65 or 6.6%, from $39.94 to $42.59.

Operating expenses, which include costs related to programming, technical
personnel, repairs and maintenance and advertising sales, increased
approximately $1.1 million or 5.2%, from $21.0 million to $22.1 million for
the year ended December 31, 2001. Operating expenses as a percentage of
revenues increased from 34.7% to 35.6% for the year ended December 31, 2001.
Such increase is primarily attributable to: (i) annual wage and benefit
increases; (ii) higher programming costs resulting from rate increases by
certain programming vendors and the launch of new programming services in
various systems; and (iii) expenses associated with the Highlands system
acquisition. On a pro forma basis, operating expenses would have increased
$1.0 million or 5.0%, from $20.1 million to $21.1 million and operating
expenses as a percentage of revenue would have increased from 34.5% to 35.5%.

General and administrative expenses, which include on-site office and
customer service personnel costs, customer billing, postage and marketing
expenses and franchise fees decreased approximately $300,000 or 2.9%, from
$10.3 million to $10.0 million for the year ended December 31, 2001. The
results are due to decreases in expenses associated with accounting, legal
and administrative services off-set by increased expenses associated with the
Highlands system acquisition. On a pro forma basis, general and
administrative expenses would have decreased $400,000 or 4.0%, from $10
million to $9.6 million.

Management fees increased $100,000 or 3.3%, from $3.0 million to $3.1 million
for the year ended December 31, 2001. Such increase was directly attributable
to the revenue increases discussed above. Management fees are calculated at
5.0% of gross revenues.

Depreciation and amortization expense increased approximately $900,000 or
4.5%, from $19.8 million to $20.7 million for the year ended December 31,
2001. Such increase is attributable to depreciation of recent equipment
purchases in upgrading plant and equipment.

Interest expense increased approximately $100,000 or .5%, from $18.4 million
to $18.5 million for the year ended December 31, 2001. The Companys weighted
average outstanding indebtedness increased from approximately $178.9 million
in 2000 to $184.6 million in 2001. In addition, the Companys weighted
average interest rate decreased from approximately 9.93% in 2000 to 9.49% in
2001.

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2000 AND 1999

Basic subscribers decreased 2,228 or 1.8%, from 126,522 to 124,294 for the
year ended December 31, 2000.

Revenues increased $1.7 million or 2.9%, from $58.8 million to $60.5 million
in 2000. Average monthly revenue per basic subscriber increased $1.82 or
4.7%, from $38.46 to $40.28 for the year ended December 31, 2000. Such
increase was attributable to: (i) rate increases implemented in a majority
of the Companys systems during the year; (ii) revenue from the increase in
penetration of new product tiers; and (iii) increases in ad sales revenue.
Basic revenue per average basic subscriber increased $1.56 or 5.6%, from
$27.84 to $29.40 for the year ended December 31, 2000. On a pro forma basis,
adjusting for the 2000 acquisition of the Kingston System: (i) revenues would
have increased $1.2 million or 2.0%, from $59.5 million to $60.7 million; and
(ii) revenue per average basic subscriber would have increased $1.30 or 4.6%,
from $28.20 to $29.50.

Operating expenses, which include costs related to programming, technical
personnel, repairs and maintenance and advertising sales, increased
approximately $1.7 million or 8.8%, from $19.3 million to $21.0 million for
the year ended December 31, 2000. Operating expenses as a percentage of
revenues increased from 32.8% to 34.7% for the year ended December 31, 2000.
Such increase is primarily attributable to: (i) annual wage and benefit
increases; (ii) higher programming costs resulting from rate increases by
certain programming vendors and the launch of new programming services in
various systems; (iii) higher advertising sales commissions and agency fees
resulting from increases in advertising revenues; and (iv) expenses
associated with the Kingston system acquisition.

General and administrative expenses, which include on-site office and
customer service personnel costs, customer billing, postage and marketing
expenses and franchise fees decreased approximately $400,000 or 3.7%, from
$10.7 million to $10.3 million for the year ended December 31, 2000. The
results are due to decreases in expenses associated with accounting, legal
and administrative services.

Management fees increased $100,000 or 3.4%, from $2.9 million to $3.0 million
for the year ended December 31, 2000. Such increase was directly attributable
to the revenue increases discussed above. Management fees are calculated at
5.0% of gross revenues.

Depreciation and amortization expense increased approximately $500,000
or 2.6%, from $19.3 million to $19.8 million for the year ended December 31,
2000. Such increase is attributable to depreciation of recent equipment
purchases in upgrading plant and equipment.

Interest expense increased approximately $600,000 or 3.4%, from $17.8
million to $18.4 million for the year ended December 31, 2000. The Companys
weighted average outstanding indebtedness increased from approximately $176.5
million in 1999 to $178.9 million in 2000. In addition, the Companys
weighted average interest rate increased from approximately 9.46% in 1999 to
9.93% in 2000.

LIQUIDITY AND CAPITAL RESOURCES

The cable television business generally requires substantial capital for
the construction, expansion, improvement and maintenance of the signal
distribution system. In addition, the Company has pursued, and intends to
pursue, a business strategy which includes selective acquisitions. The
Company has financed these expenditures through a combination of cash flow
from operations and borrowings under the revolving credit and term loan
facility provided by a group of banks. For the years ended December 31, 1999
and 2000 and 2001, the Companys net cash provided from operations was $8.1
million, $8.5 million and $10.1 million, respectively, all of which were
sufficient to meet the Companys debt service obligations and capital
expenditure requirements for the respective periods, excluding acquisitions.
Acquisitions of cable television systems during these periods primarily were
financed through bank borrowings. The Companys debt service obligations for
the year ended December 31, 2002 are expected to be approximately $16
million. The Company anticipates that cash flow from operations will be
sufficient to service its debt through December 31, 2002. The Companys debt
service obligations for the year ended December 31, 2003 are anticipated to
be $18.9 million. The Company believes that cash flow from operations will be
adequate to meet the Companys long-term liquidity requirements, excluding
acquisitions, 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 $10.1 million for the year
ended December 31, 2001. Adjustments to the $1.9 million net loss for the
period to reconcile to net cash provided by operating activities consisted
primarily of $21.4 million

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of depreciation and amortization, off-set by the $12.8 million gain on
disposal of assets primarily due to the disposition of the Bainbridge,
Washington system and other changes in operating balance sheet accounts.

Net cash provided by investing activities was $1.6 million for the year
ended December 31, 2001, and consisted primarily of $13.1 million in capital
expenditures and $3.9 million for the Highlands, North Carolina acquisition
off-set by $18.6 in proceeds primarily from the Bainbridge, Washington
disposition.

Net cash used in financing activities was $11.6 million for the year
ended December 31, 2001. The Company had $6.8 million in additions to
long-term debt and made $18.3 million of principal payments on notes payable.

EBITDA increased approximately $700,000 or 2.7%, from $26.2 million to
$26.9 million for the year ended December 31, 2001. EBITDA margin was 43.3%
for the year ended December 31, 2001, remaining consistent with the prior
year. The aforementioned increases in revenues were off-set by increased
operating expenses resulting from rate increases by certain programming
vendors and the launch of new programming services. On a pro forma basis,
adjusting for the 2001 acquisition of the Highlands system and disposition of
the Bainbridge system, EBITDA would have increased approximately $400,000 or
1.6% from $25.5 million to $25.9 million and EBITDA margin would have
decreased from 43.6% to 43.5% for the year ended December 31, 2001.

Net cash provided by operating activities was $8.5 million for the year
ended December 31, 2000. Adjustments to the $14.3 million net loss for the
period to reconcile to net cash provided by operating activities consisted
primarily of $20.6 million of depreciation and amortization.

Net cash used in investing activities was $13.0 million for the year
ended December 31, 2000, and consisted primarily of $9.8 million in capital
expenditures and $3.1 million for the acquisition of the Kingston system.

Net cash provided by financing activities was $5.6 million for the year
ended December 31, 2000. The Company had $85.6 million in additions to long
term debt and made $78.0 million of principal payments on notes payable.

EBITDA increased approximately $300,000 or 1.2%, from $25.9 million to
$26.2 million for the year ended December 31, 2000. EBITDA margin decreased
from 44.0% to 43.3% for the year ended December 31, 2000. These changes were
attributable primarily to the aforementioned increases in revenues. On a pro
forma basis, adjusting for the 2000 acquisition of the Kingston system,
EBITDA would have increased approximately $200,000 or less than 1% from $26.1
million to $26.3 million and EBITDA margin would have decreased from 43.9% to
43.3% for the year ended December 31, 2000.

EBITDA increased approximately $1.5 million or 6.1%, from $24.4 million
to $25.9 million for the year ended December 31, 1999. These changes were
attributable primarily to the revenue increases in 1999. On a pro forma
basis, adjusting for 1998 acquisitions and dispositions, EBITDA would have
increased approximately $1.1 million or 4.4% from $24.8 million to $25.9
million and EBITDA margin would have increased from 43.4% to 44.0% for the
year ended December 31, 1999.

In November 1997, the Company issued $100 million of 10 -1/4% senior
subordinated notes due November 15, 2007. Proceeds from the offering were
utilized to pay transaction costs and reduce amounts outstanding under the
Companys Senior Credit Facility by $95 million. The indenture pursuant to
which the notes were issued will, among other things, limit the ability of
the Company and its subsidiaries to: (i) incur additional indebtedness or
issue preferred stock; (ii) make certain restricted payments as defined in
the indenture; (iii) grant liens on assets; (iv) merge, consolidate or
transfer substantially all of their assets; (v) enter into transactions with
certain related parties; (vi) make certain payments affecting subsidiaries;
(vii) sell assets; and (viii) issue capital stock of subsidiaries.
Additionally, the Company has agreed to restrictive covenants which require
the maintenance of certain ratios, including a debt to annualized operating
cash flow ratio of 6.50 to 1. As of December 31, 2001, the Company was in
compliance with the terms of the Notes.

On August 14, 2000, the Company refinanced its existing senior bank
indebtedness (the Revised Senior Credit Facility). The Revised Senior
Credit Facility establishes a 364-day revolving credit loan with a term-out
option in the aggregate principal amount of $35 million, a seven-year
revolving credit loan in the aggregate principal amount of $40 million and a
seven-year term loan in the aggregate principal amount of $35 million.
During 2001 the Company reduced the amount of unborrowed commitments under
the Revised Senior Credit Facility. At December 31, 2001 approximately $54
million was outstanding under term loans, approximately $17 million was
outstanding under the revolving credit loan and $5.7 million was unborrowed.
Amounts outstanding under the Revised Senior Credit Facility mature on June
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.

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At the Companys election, the interest rate per annum applicable to the
Revised Senior Credit Facility is a fluctuating rate of interest measured by
reference to either: (i) an adjusted London interbank offered rate (LIBOR)
plus a borrowing margin; or (ii) the base rate of the managing agent bank
(the Base Rate), which Base Rate is equal to the greater of the Federal
Funds Effective Rate plus 0.50% or the corporate base rate announced by the
managing agent bank, plus a borrowing margin. The applicable borrowing
margins vary, based upon the Companys leverage ratio, from 1.00% to 2.75%
for LIBOR loans and from 0.00% to 1.75% for Base Rate loans.

The Revised Senior Credit Facility contains a number of covenants which,
among other things, require the Company to comply with specified financial
ratios and tests, including continuing maintenance, as tested on a quarterly
basis, of: (A) an interest coverage ratio (the ratio of Annualized Operating
Cash Flow (as defined) to interest expense) of at least 1.4 to 1.0 initially,
increasing over time to 2.0 to 1.0; (B) a fixed charge coverage ratio (the
rate of the Companys Annual Operating Cash Flow (as defined) to capital
expenditures and principal and interest payments) of at least 1.05 to 1.0
commencing January 1, 2003; (C) a pro forma debt service ratio (the ratio of
the Companys current Operating Cash Flow (as defined) to the Companys debt
service obligations for the following twelve months) of 1.25 to 1.0; and (D)
a leverage ratio (the ratio of total Debt (as defined) to Annualized
Operating Cash Flow) of not more than 6.75 to 1.0 initially, 6.50 at December
31, 2001, decreasing over time to 4.5 to 1.0. The Company expects that cash
provided from operations will be sufficient to cover its future debt service
obligations and debt covenant requirements.

At December 31, 2001, the outstanding balance under the Revised Senior
Credit Facility was $71,031,182. As of April 1, 2002, interest rates on the
Revised Senior Credit Facility were as follows: $20,000,000 fixed at 9.54%
under the terms of an interest rate swap agreement with the Companys lender
expiring August 20, 2002; $27,000,000 fixed at 5.918% under the terms of an
interest rate swap with the Companys lender expiring February 20, 2003;
$5,868,387 fixed at 9.62% under the terms of an interest rate swap with the
Companys lender expiring August 17, 2002; $16,970,000 at a LIBOR based rate
of 4.66% expiring on May 20, 2002; $700,000 at a LIBOR based rate of 4.66%
expiring on March 28, 2002; $400,000 at a LIBOR based rate of 4.40% expiring
on April 19, 2002; $70,000 at a LIBOR based rate of 4.41% expiring on April
22, 2002. The balance of $22,795 bears interest at the prime rate plus 1.75%
(currently 6.50%). The above rates include a margin paid to the lender based
on overall leverage and may increase or decrease as the Companys overall
leverage fluctuates.

The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to
manage well-defined interest rate risks. The Company periodically enters
into interest rate swap agreements with major banks or financial institutions
(typically its bank) in which the Company pays a fixed rate and receives a
floating rate with the interest payments being calculated on a notional
amount.

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at fair value. SFAS
No. 133 also established new accounting rules for hedging instruments which,
depending on the nature of the hedge, require that changes in the fair value
of derivatives either be offset against the change in fair value of the
hedged assets or liabilities through earnings, or be recognized in other
comprehensive income until the hedged item is recognized in earnings.

The Company has elected not to designate its derivatives as hedges under SFAS
133. Accordingly, the Company has recorded a liability equal to the fair
market value of its derivatives, $689,000 as other comprehensive income
related to the cumulative effect of a change in accounting principle, which
is being amortized into earnings over the life of the interest rate swap
agreements, and other expense of approximately $2.2 million due to a $2.6
million change in value of its derivatives during 2001, offset by the
amortization of the change in accounting principle of $421,000.

The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments but does not expect
any counterparties to fail to meet their obligations. These notional amounts
do not represent amounts exchanged by the parties and, thus, are not a
measure of exposure to the Company through its use of derivatives. The
exposure in a derivative contract is the net difference between what each
party is required to pay based on the contractual terms against the notional
amount of the contract, which in the Companys case are interest rates.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 141 and 142 In June 2001,
the Financial Accounting Standards Board (FASB) issued SFAS No. 141,
Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 prospectively prohibits the pooling of interest method
of accounting for business combinations initiated after June 30, 2001. SFAS
No. 142 establishes a new method of testing goodwill for impairment on an
annual basis or on an

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interim basis if an event occurs or circumstances change that would reduce
the fair value of a reporting unit below its carrying value. The
amortization of existing goodwill will cease on December 31, 2001. Any
goodwill resulting from acquisitions completed after June 30, 2001 will not
be amortized. SFAS No. 141 is not expected to have a material impact on the
Companys financial position, results of operations or cash flows. The
adoption of SFA No. 142 will result in the Companys discontinuation of
amortization of its goodwill, approximately $170,000 a year. In addition,
the Company is evaluating its other intangible assets to determine whether or
not they meet the definition of indefinite lived assets. Assets determined to
meet this definition, would also no longer be amortized as of January 1,
2002. The Company will be required to test its goodwill and any other
assets determined to have indefinite lives for impairment under the new
standard beginning in the first quarter of 2002, which could have an adverse
effect on the Companys future results of operations if an impairment occurs.
The net book value of the goodwill remaining at December 31, 2001 was
$3,937,329.

Statement of Financial Accounting Standards No. 143 In June 2001, the FASB
issued SFAS No. 143 Accounting for Asset Retirement Obligations. SFAS No.
143 requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. Statement No. 143 will be effective for the Company
beginning January 1, 2003. The Company has not yet estimated the impact of
implementation of SFAS No. 143 on its financial position, results of
operations or cash flows.

Statement of Financial Accounting Standards No. 144 In August 2001, the
FASB issued SFAS No. 144 Accounting for the Impairment or Disposal of
Long-Lived Assets. Statement No. 144 addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets
to be disposed of. Statement No. 144 supercedes Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of, and supercedes the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, Reporting the Results of
Operations  Reporting the Effects of Disposal of Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions,
for segments of a business to be disposed of. Implementation of Statement
No. 144, which is effective January 1, 2002, is not expected to have a
material impact on the Companys financial position, results of operations or
cash flows.

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. As of April 1, 2002, the
Company had entered into three interest rate swap agreements for
$20,000,000, $20,000,000, and $27,000,000 of these borrowings, to partially
mitigate interest rate exposure. Interest rate swaps have the effect of
converting the applicable variable rate obligations to fixed or other
variable rate obligations. 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 $852,000, of which $670,000 would be
mitigated by interest rate swap agreements currently in place.

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

CAPITAL EXPENDITURES

For the year ended December 31, 2001, the Company had capital expenditures of
approximately $13.1 million excluding acquisitions. Capital expenditures
included: (i) expansion and improvements of cable properties including new
product digital launches; (ii) additions to plant and equipment; (iii)
maintenance of existing equipment; (iv) cable line drops and extensions and
installations of cable plant facilities, and (v) vehicle replacements.

The Company plans to invest approximately $9.0 million in capital
expenditures for 2002. This represents anticipated expenditures for upgrading
and rebuilding certain distribution facilities, new product digital launches,
extensions of distribution facilities to add new subscribers, vehicle
replacements and general maintenance. It is expected that cash flows from
operations will be sufficient to fund planned capital expenditures.

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CAPITAL 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 as of December 31, 2001 and
the anticipated effect of these obligations on its liquidity in future years:

|                                       |  |                        |            |      |  |      |            |      |  |      |            |            |  |       |            |   |  |  |            |   |  |  |             |   |  |  |             |  
|-------------------------------------- |  | ---------------------- | ---------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- | ---------- |  | ----- | ---------- | - |  |  | ---------- | - |  |  | ----------- | - |  |  | ----------- | -
|                                       |  | Expected Maturity Date
|                                       |  |                       
|                                       |  | 2002                   |            | 2003 |  | 2004 |            | 2005 |  | 2006 |            | Thereafter |  | Total
|                                       |  |                        |            |      |  |      |            |      |  |      |            |            |  |      
|Term Loan                              |  |                        |            |      |  |      |            |      |  |      |            |            |  |       |            |   |  |  |            |   |  |  |             |   |  |  |             |  
|Debt Maturity                          |  |                        | 0          |      |  |      | 3,500,000  |      |  |      | 10,500,000 |            |  |       | 14,000,000 |   |  |  | 22,819,784 |   |  |  | 120,211,398 |   |  |  | 171,031,182 |  
|Interest Payments                      |  |                        | 16,230,859 |      |  |      | 16,064,784 |      |  |      | 15,400,484 |            |  |       | 14,237,959 |   |  |  | 12,490,860 |   |  |  | 5,704,031   |   |  |  | 80,128,977  |  
|Current Weighted
Average Interest
Rate |  |                        | 9.49       | %    |  |      | 9.49       | %    |  |      | 9.49       | %          |  |       | 9.49       | % |  |  | 9.49       | % |  |  | 9.49        | % |  |  | 9.49        | %
|Minimum Operating
Lease Payments       |  |                        | 86,705     |      |  |      | 72,653     |      |  |      | 70,241     |            |  |       | 55,069     |   |  |  | 53,667     |   |  |  | 93,312      |   |  |  | 431,647     |  
|Total Contractual
Cash Obligations(a)  |  |                        | 16,317,564 |      |  |      | 19,637,437 |      |  |      | 25,970,725 |            |  |       | 28,293,028 |   |  |  | 35,364,311 |   |  |  | 126,008,741 |   |  |  | 251,591,806 |  



---

|(a) |  | These contractual obligations do not include accounts payable and
accrued liabilities which are expected to be paid in 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------

TRANSACTIONS WITH RELATED PARTIES

MANAGEMENT FEES

The Company pays management fees to NTC equal to 5% of NCTVs gross revenues,
excluding revenues from the sale of cable television systems or franchises.

REIMBURSEMENTS

NTC provides or causes to be provided certain centralized services to the
Company and other affiliated entities. NTC is entitled to reimbursement from
the Company for various expenses incurred by it or its affiliates on behalf
of the Company allocable to its management of the Company, including travel
expenses, pole and site rental, lease payments, legal expenses, billing
expenses, insurance, governmental fees and licenses, headquarters supplies
and expenses, pay television expenses, equipment and vehicle charges,
operating salaries and expenses, administrative salaries and expenses,
postage and office maintenance. NTC has historically assigned its
reimbursement rights to NCC.

The amounts billed to the Company consist of management fees and certain
allocated costs, which are based on costs incurred by affiliates in rendering
the services. The costs of certain services are charged directly to the
Company, based upon the personnel time spent by the employees rendering the
service. The cost of other services is allocated to the Company and
affiliates based upon relative size and revenue. NTC has, from time to time,
revised the allocation used to determine the amount of operating costs
charged to the Company. Management believes that the methods used to
allocate services to the Company are reasonable. However, the amounts
charged are not necessarily indicative of costs that would be incurred if the
related services were provided by a non-affiliated third party. Amounts
charged for these services were $310,931, $1,258,412 and $2,121,890 for 2001,
2000 and 1999, respectively.

NCSC was formed to provide billing system support to cable systems owned and
managed by NCC and NTC. In addition, NCSC provides technical support
associated with the build out and upgrade of Northland affiliated cable
systems. CAC assists in the development of local advertising as well as
billing for video commercial advertisements to be cablecast on Northland
affiliated cable systems. In 2001, 2000, and 1999, the Company paid
$781,497, $788,795, and $729,526 for these services. Of this amount $222,846
and $143,901 were capitalized in 2001 and 2000, respectively, related to the
build-out and upgrade of cable systems.

The Company has operating management agreements with affiliated entities
managed by NCC. Under the terms of these agreements, the Company or an
affiliate serves as the managing agent for certain cable television systems
and is reimbursed

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for certain operating, administrative and programming
expenses. The Company paid $90,098, $84,526 and $43,805, net, under the
terms of these agreements during 2001, 2000 and 1999, respectively.

CERTAIN BUSINESS RELATIONSHIPS

John E. Iverson, a Director and Assistant Secretary of the Company, is a
member of the law firm of Ryan, Swanson & Cleveland P.L.L.C., which has
rendered and is expected to continue to render legal services to the Company
and its affiliates.

ACQUISITION OF SYSTEMS AND DISPOSITION OF ASSETS

On March 31, 2000, The Company acquired the operating assets and franchise
rights to cable systems serving approximately 1,600 basic subscribers in the
communities of Kingston and Hansville, Washington, located in Kitsap County,
from North Star Cable, Inc.. The systems were acquired at a purchase price
of $3,100,000 adjusted at closing for proration of certain revenues and
expenses. Of the total purchase price, North Star Cable, Inc. received
approximately $3,100,000 on March 31, 2000. The acquisition was financed
through borrowings under the Revised Senior Credit Facility.

On September 18, 2001, The Company sold its cable system serving the areas in
and around McCormick, South Carolina, to Quarterlane Farms, LLC. The net
proceeds from the sale of the system were approximately $160,000. The
McCormick system served approximately 440 basic subscribers.

On September 30, 2001, The Company acquired the cable system serving the
areas in and around Highlands, North Carolina, approximately 3,200 basic
subscribers, from an affiliated limited partnership managed by NCC. The
system was acquired at a purchase price of $4,600,000 and was financed with
approximately $3,800,000 of cash on hand and an equity contribution from the
Companys parent of approximately $800,000.

On December 21, 2001, The Company sold its cable systems serving the
areas of Bainbridge Island, Kingston and Hansville Washington, which
represented approximately 6,450 basic subscribers, to TCI Cable
Partners of St. Louis, L.P.. The systems were sold for approximately
$19,800,000. The Company recognized a gain of approximately $12,700,000 related to the
transaction.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The audited consolidated financial statements of the Company for the years
ended December 31, 2001, 2000 and 1999 are included as a part of this filing
(see Item 14(a)(1) below). The consolidated financial statements as of and
for the year ended December 31, 2001 have been restated to reflect the effect
of the corrections described in Note 2.




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

None.

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PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information concerning directors and
executive officers of the Company, none of whom are compensated by the
Company for their respective services to the Company and all but one of whom
devotes a substantial amount of his time to the affairs of affiliated
entities other than the Company. Each director holds office until the next
annual meeting of shareholders or until his successor is elected or appointed
and qualified.

|                  |  |     |    |          |  |                                                                      
|----------------- |  | --- | -- | -------- |  | ---------------------------------------------------------------------
|NAME              |  | AGE |    | POSITION
|                  |  |     |    |         
|John S. Whetzell  |  |     | 60 |          |  | Director, Chairman of the Board and Chief Executive Officer          
|Richard I. Clark  |  |     | 44 |          |  | Director, Executive Vice President, Treasurer and
Assistant Secretary
|Gary S. Jones     |  |     | 44 |          |  | President                                                            
|Richard J. Dyste  |  |     | 56 |          |  | Senior Vice President, Technical Services                            
|R. Gregory Ferrer |  |     | 46 |          |  | Vice President and Assistant Treasurer                               
|H. Lee Johnson    |  |     | 58 |          |  | Divisional Vice President                                            
|John E. Iverson   |  |     | 65 |          |  | Director and Secretary                                               
|Matthew J. Cryan  |  |     | 37 |          |  | Vice President, Budgets and Planning                                 
|Laura N. Williams |  |     | 35 |          |  | Vice President, Senior Counsel                                       
|Rick J. McElwee   |  |     | 40 |          |  | Vice President, Controller                                           

JOHN S. WHETZELL (AGE 60). Mr. Whetzell is the founder of Northland
Communications Corporation, Its Chief Executive Officer and has been a
Director since March 1982. Mr. Whetzell became Chairman of the Board of
Directors in December 1984. He also serves as Chief Executive Officer and
Chairman of the Board of Northland Telecommunications Corporation and each of
its subsidiaries. He has been involved with the cable television industry for
over 27 years. Between March 1979 and February 1982 he was in charge of the
Ernst & Whinney national cable television consulting services. Mr. Whetzell
first became involved in the cable television industry when he served as the
Chief Economist of the Cable Television Bureau of the Federal Communications
Commission (FCC) from May 1974 to February 1979. He provided economic studies
to support the deregulation of cable television both in federal and state
arenas. He participated in the formulation of accounting standards for the
industry and assisted the FCC in negotiating and developing the pole
attachment rate formula for cable television. His undergraduate degree is in
economics from George Washington University, and he has an MBA degree from
New York University.

JOHN E. IVERSON (AGE 65). Mr. Iverson is the Secretary of Northland
Communications Corporation and has served on the Board of Directors since
December 1984. He also is the Secretary and serves on the Board of Directors
of Northland Telecommunications Corporation and each of its subsidiaries. He
is currently a member in the law firm of Ryan, Swanson & Cleveland, P.L.L.C.
He is a member of the Washington State Bar Association and American Bar
Association and has been practicing law for more than 38 years. Mr. Iverson
is the past President and a Trustee of the Pacific Northwest Ballet
Association. Mr. Iverson has a Juris Doctor degree from the University of
Washington.

RICHARD I. CLARK (AGE 44). Mr. Clark is an original incorporator of
Northland Communications Corporation and serves as Executive Vice President,
Assistant Secretary and Assistant Treasurer of Northland Communications
Corporation. He also serves as Executive Vice President, Assistant Secretary
and Treasurer of Northland Telecommunications Corporation. Mr. Clark has
served on the Board of Directors of both Northland Communications Corporation
and Northland Telecommunications Corporation since July 1985. In addition to
his other responsibilities, Mr. Clark is responsible for the administration
and investor relations activities of Northland, including financial planning
and corporate development. From July 1979 to February 1982, Mr. Clark was
employed by Ernst & Whinney in the area of providing cable television
consultation services and has been involved with the cable television
industry for nearly 23 years. He has directed cable television feasibility
studies and on-site market surveys. Mr. Clark has assisted in the design and
maintenance of financial and budget computer programs, and he has prepared
documents for major cable television companies in franchising and budgeting
projects through the application of these programs. In 1979, Mr. Clark
graduated cum laude from Pacific Lutheran University with a Bachelor of Arts
degree in accounting.

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GARY S. JONES (AGE 44). Mr. Jones is President of Northland
Telecommunications Corporation and each of its subsidiaries. Mr. Jones joined
Northland in March 1986 as Controller and had previously served as Vice
President and chief Financial Officer for Northland. Mr. Jones is
responsible for cash management, financial reporting and banking relations
for Northland and is involved in the acquisition and financing of new cable
systems. Prior to joining Northland, Mr. Jones was employed as a Certified
Public Accountant with Laventhol & Horwath from 1980 to 1986. Mr. Jones
received his Bachelor of Arts degree in Business Administration with a major
in accounting from the University of Washington in 1979.

RICHARD J. DYSTE (AGE 56). Mr. Dyste has served as Senior Vice
President-Technical Services of Northland Telecommunications Corporation and
each of its subsidiaries. He joined Northland in April 1987. Mr. Dyste is
responsible for planning and advising all Northland cable systems with regard
to technical performance as well as system upgrades and rebuilds. He is a
past president and current member of the Mount Rainier Chapter of the Society
of Cable Television Engineers, Inc. Mr. Dyste joined Northland in 1986 as an
engineer and served as Operations Consultant to Northland Communications
Corporation from August 1986 until April 1987. From 1977 to 1985, Mr. Dyste
owned and operated Bainbridge TV Cable. He is a graduate of Washington
Technology Institute.

H. LEE JOHNSON (AGE 58). Mr. Johnson has served as Divisional Vice
President for Northland since March 1994. He is responsible for the
management of systems serving subscribers in Alabama, Georgia, Mississippi,
North Carolina and South Carolina. Prior to his association with Northland he
served as Regional Manager for Warner Communications, managing four cable
systems in Georgia from 1968 to 1973. Mr. Johnson has also served as
President of Sunbelt Finance Corporation and was employed as a System Manager
for Statesboro CATV when Northland purchased the system in 1986. Mr. Johnson
has been involved in the cable television industry for over 33 years and is a
current member of the Society of Cable Television Engineers. He is a graduate
of Swainsboro Technical Institute and has attended numerous training
seminars, including courses sponsored by Jerrold Electronics, Scientific
Atlanta, The Society of Cable Television Engineers and CATA.

R. GREGORY FERRER (AGE 46). Mr. Ferrer joined Northland in March 1984 as
Assistant Controller and currently serves as Vice President and Treasurer of
Northland Communications Corporation. Mr. Ferrer also serves as Vice
President and Assistant Treasurer of Northland Telecommunications
Corporation. Mr. Ferrer is responsible for coordinating all of Northlands
property tax filing, insurance requirements and system programming contracts
as well as interest rate management and other treasury functions. Prior to
joining Northland, he was a Certified Public Accountant at Benson &
McLaughlin, a local public accounting firm, from 1981 to 1984. Mr. Ferrer
received his Bachelor of Arts in Business Administration from Washington
State University with majors in marketing in 1978 and accounting and finance
in 1981.

MATTHEW J. CRYAN (AGE 37). Mr. Cryan is Vice President  Budgets and
Planning and has been with Northland since September 1990. Mr. Cryan is
responsible for the development of current and long-term operating budgets
for all Northland entities. Additional responsibilities include the
development of financial models used in support of acquisition financing,
analytical support for system and regional managers, financial performance
monitoring and reporting and programming analysis. Prior to joining
Northland, Mr. Cryan was employed as an analyst with NKV Corp., a securities
litigation support firm located in Redmond, Washington. Mr. Cryan graduated
from the University of Montana in 1988 with honors and holds a Bachelor of
Arts in Business Administration with a major in finance.

LAURA N. WILLIAMS (AGE 35). Ms Williams is Vice President and Senior
Counsel for Northland and has served in this role since August 2000. Prior
to this time, she served as Associate Counsel for each of the Northland
entities from August 1995. She is a member of the Washington State Bar
Association, American Bar Association and Women in Telecommunications. Ms.
Williams received her Bachelor of Science in Business Administration with a
major in finance and an MBA degree from California State University, Long
Beach, and has a Juris Doctor degree from Seattle University School of Law.

RICK J. MCELWEE (AGE 40). Mr. McElwee is Vice President and Controller
for Northland. He joined Northland in May 1987 as System Accountant and was
promoted to Assistant Controller of Northland Cable Television, Inc. in 1993.
Mr. McElwee became Divisional Controller of Northland Telecommunications
Corporation in 1997 and in January 2001, he was promoted to Vice President
and Controller of Northland Telecommunications Corporation. Mr. McElwee is
responsible for managing all facets of the accounting and financial reporting
process for Northland. Prior to joining Northland, he was employed as an
accountant with Pay n Save Stores, Inc., a regional drugstore chain. Mr.
McElwee graduated from Central Washington University in 1985 and holds a
Bachelor of Science in Business Administration with a major in accounting.

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ITEM 11. EXECUTIVE COMPENSATION

None of the employees of the Company are deemed to be executive officers
of the Company. Services of the executive officers and other employees of NTC
are provided to the Company for which the Company pays NTC a fee pursuant to
the Management Agreement and overhead reimbursements. The executive officers
and other employees of NTC who provide services to the Company are
compensated in their capacity as executive officers and employees of NTC and
therefore receive no compensation from the Company. No portion of the
management fee paid by the Company is allocated to specific employees for the
services performed by such employees.

DIRECTOR COMPENSATION

The Company does not currently compensate members of its Board of Directors
for their services as directors.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Security ownership of
management as of December 31, 2001 is as follows:

The Company is a wholly owned subsidiary of Northland Telecommunication
Corporation, a Washington corporation.

The following table sets forth certain information with respect to the
beneficial ownership of common stock of NTC as of the date of this filing by:
(i) each person who is known by the Company to beneficially own 5% or more of
the outstanding shares of common stock of NTC; (ii) each director of the
Company; (iii) each executive officer of the Company; and (iv) the Companys
executive officers and directors as a group. The address of each such person
is in care of the Company, 1201 Third Avenue, Suite 3600, Seattle, Washington
98101.

|                                                              |  |                     |           |                     |  |  |      |  
|------------------------------------------------------------- |  | ------------------- | --------- | ------------------- |  |  | ---- | -
|                                                              |  | NUMBER OF           |           | PERCENTAGE OF      
|                                                              |  | SHARES BENEFICIALLY |           | SHARES BENEFICIALLY
|BENEFICIAL OWNER                                              |  | OWNED               |           | OWNED              
|                                                              |  |                     |           |                    
|John S. Whetzell                                              |  |                     | 1,013,624 |                     |  |  | 22.6 | %
|Adele P. Butler                                               |  |                     | 530,000   |                     |  |  | 11.8 | %
|Pamela B. McCabe                                              |  |                     | 510,144   |                     |  |  | 11.4 | %
|Robert M. Arnold                                              |  |                     | 384,000   |                     |  |  | 8.6  | %
|Richard I. Clark                                              |  |                     | 312,995   |                     |  |  | 7.0  | %
|Robert A. Mandich                                             |  |                     | 278,400   |                     |  |  | 6.2  | %
|James E. Hanlon                                               |  |                     | 61,322    |                     |  |  | 1.4  | %
|Gary S. Jones                                                 |  |                     | 52,797    |                     |  |  | 1.2  | %
|John E. Iverson                                               |  |                     | 50,000    |                     |  |  | 1.1  | %
|Richard J. Dyste                                              |  |                     | 47,748    |                     |  |  | 1.1  | %
|H. Lee Johnson                                                |  |                     | 23,731    |                     |  |  | *    |  
|R. Gregory Ferrer                                             |  |                     | 11,079    |                     |  |  | *    |  
|Matthew J. Cryan                                              |  |                     | 5,391     |                     |  |  | *    |  
|Laura N. Williams                                             |  |                     | 5,000     |                     |  |  | *    |  
|Rick J. McElwee                                               |  |                     | 4,000     |                     |  |  | *    |  
|All executive officers and directors as a group
(ten persons) |  |                     | 1,526,365 |                     |  |  | 34.0 | %



---

|* |  | Represents less than 1% of the shares beneficially owned.
|- |  | ---------------------------------------------------------

(b) CHANGES IN CONTROL. NTC has pledged the stock of the Company as
collateral pursuant to the terms of the Companys Revised Senior Credit
Facility.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a)  TRANSACTIONS WITH MANAGEMENT AND OTHERS.

The Company is part of an affiliated group of corporations and limited
partnerships controlled, directly or indirectly, by NTC (the NTC
Affiliates). NTC, in turn, is owned by the individuals and in the
percentages set forth in the table above.

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In addition to the Company, NTC has
three other direct, wholly owned subsidiaries: Northland Communications
Corporation (NCC); Northland Cable Services Corporation (NCSC); and
Northland Media, Inc. (NMI). In turn, NCC is the sole shareholder of
Northland Cable Properties, Inc. (NCPI) and is the managing general partner
of Northland Cable Properties Seven Limited Partnership (NCP-7) and
Northland Cable Properties Eight Limited Partnership (NCP-8). NCC is also
the managing member of Northland Cable Networks, LLC (NCN LLC). In
addition, NCPI is the majority member and manager of Northland Cable
Ventures, LLC (NCV), NCSC is the sole shareholder of Cable Ad-Concepts,
Inc. (CAC) and NMI is the sole shareholder of Statesboro Media, Inc. and
Corsicana Media, Inc. Each of the Companys directors is also a director of
NTC and each of its wholly-owned direct subsidiaries and certain other NTC
Affiliates and the Companys officers are also officers of certain of the NTC
Affiliates.

MANAGEMENT AGREEMENT WITH NTC

NTC currently supervises all aspects of the business and operations of the
Company pursuant to an Operating Management Agreement between the Company and
NTC dated August 23, 1994 (the Management Agreement). The Management
Agreement continues in effect until terminated by either party on 30-days
written notice.

The Management Agreement provides that NTC shall render or cause to be
rendered supervisory services to the Company, including, among other things
supervising and monitoring: (i) the affairs, management and operations of the
Company and its systems; (ii) the accounting and other financial books and
records of the Company and its systems; (iii) the hiring, training and
supervision of the Companys employees; and (iv) the Companys fulfillment of
its contractual obligations in connection with its systems. In return for its
management services, NTC receives a management fee, payable monthly, equal to
5.0% of the Companys gross revenues (the Management Fee). For the years
ended December 31, 1999, 2000 and 2001, the Company paid a Management Fee of
$2.9 million, $3.0 million and $3.1 million, respectively.

In addition to the Management Fee, the Management Agreement provides that NTC
is entitled to reimbursement from the Company for various expenses incurred
by NTC or the NTC Affiliates on behalf of the Company allocable to its
management of the Company, including travel expenses, pole and site rental,
lease payments, legal expenses, billing expenses, insurance, governmental
fees and licenses, headquarters supplies and expenses, pay television
expenses, equipment and vehicle charges, operating salaries and expenses,
administrative salaries and expenses, postage and office maintenance. These
expenses are generally allocated among the Company and other managed
affiliates based upon relative subscriber counts and revenues. NTC
historically has assigned its right to reimbursement from the Company to its
direct subsidiary, NCC, and expects to continue to do so in the future. For
the years ended December 31, 1999, 2000 and 2001, the Company reimbursed
Northland Communications Corporation approximately $2.1 million, $1.3 million
and $300,000, respectively, for such expenses.

ARRANGEMENTS BETWEEN NORTHLAND CABLE NEWS, INC. AND AFFILIATES

Pursuant to an arrangement, which commenced in July 1994, Northland Cable
News, Inc. receives monthly program license fees from the Company as well as
NCP-7, NCPI and NCV as payment for Northland Cable News programming provided
to such affiliates. The aggregate amount of such fees is based upon costs
incurred in providing such programming, and is allocated among the
Participating Affiliates based upon relative subscriber counts. Total license
fees received from affiliates for the years ended December 31, 1999 and 2000,
were $631,865 and $363,475, respectively. As of January 2001 the Company
ceased operations of NCN.

ARRANGEMENTS WITH NORTHLAND CABLE SERVICES CORPORATION AND CABLE AD-CONCEPTS,
INC.

Northland Cable Services Corporation (NCSC) is a wholly owned direct
subsidiary of NTC formed to provide billing system support to cable systems
owned and managed by NCC and NTC. In addition, NCSC provides technical
support associated with the build out and upgrade of Northland affiliated
cable systems. Cable Ad-Concepts, Inc. (CAC) assists in the development of
local advertising as well as billing for video commercial advertisements to
be telecast on Northland affiliated cable systems. For the years ended
December 31, 1999, 2000 and 2001, the Company paid $729,526, $788,795
and $781,497, for these services. Of this amount $143,901 and $222,846 were
capitalized in 2000 and 2001, respectively, related to the build-out and
upgrade of cable systems.

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OPERATING AGREEMENTS WITH AFFILIATES

The Company has operating management agreements with affiliated entities
pursuant to which, in certain instances, the Company serves as the local
managing agent for certain systems and, in other instances, an affiliate
serves as the local managing agent for certain of the Companys systems. In
addition, the Company and its affiliates render miscellaneous services to one
another on a cost-of-service basis. For the years ended December 31, 1999,
2000 and 2001, the Company paid affiliates an aggregate of $43,805, $84,526
and $90,098, respectively, for performing such services for affiliates.

(b)  CERTAIN BUSINESS RELATIONSHIPS. John E. Iverson, a Director and Assistant
Secretary of the Company, is a member of the law firm of Ryan, Swanson &
Cleveland P.L.L.C., which has rendered and is expected to continue to render
legal services to the Company and its affiliates.

(c)  INDEBTEDNESS OF MANAGEMENT. None.




ITEM 14. CONTROLS AND PROCEDURES

Not Applicable.

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PART IV




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

(a) DOCUMENTS FILED AS A PART OF THIS REPORT:

|    |  |                                                                                                                              |  |             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | ------------
|    |  |                                                                                                                              |  | SEQUENTIALLY
|    |  |                                                                                                                              |  | NUMBERED    
|    |  |                                                                                                                              |  | PAGE        
|    |  |                                                                                                                              |  |             
|(1) |  | FINANCIAL STATEMENTS:                                                                                                        |  |             
|    |  | Independent Auditors Report                                                                                                 |  | 31          
|    |  | Report of Independent Public Accountants                                                                                     |  | 32          
|    |  | Consolidated Balance Sheets December 31, 2001 (restated) and 2000                                                           |  | 33          
|    |  | Consolidated Statements of Operations and Comprehensive Loss for the years
ended December 31, 2001 (restated), 2000 and 1999 |  | 35          
|    |  | Consolidated Statements of Changes in Shareholders Deficit for
the years ended December 31, 2001 (restated), 2000 and 1999  |  | 36          
|    |  | Consolidated Statements of Cash Flows for the years
ended December 31, 2001 (restated), 2000 and 1999                        |  | 37          
|    |  | Notes to Financial Statements December 31, 2001                                                                             |  | 39          



|(2) |  | EXHIBITS:
|--- |  | ---------

|       |  |                                                                                                                                                  
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|99.1   |  | Letter regarding representation of Arthur Andersen, LLP dated
April 1, 2002.                                                                     
|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. No Company reports on Form 8-K have been filed
during the fourth quarter of the fiscal year ended December 31, 2001.

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholder of Northland Cable Television, Inc.:

We have audited the accompanying consolidated balance sheet of Northland Cable
Television, Inc. and subsidiary (a Washington Corporation and wholly owned
subsidiary of Northland Telecommunications Corporation) as of December 31, 2001
and the related consolidated statements of operations and comprehensive loss,
changes in shareholders deficit and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. The 2000 and 1999 consolidated
financial statements of Northland Cable Television, Inc. and subsidiary were
audited by other auditors who have ceased operations. Those auditors expressed
an unqualified opinion on those consolidated financial statements in their
report dated March 1, 2002.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 2001 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Northland
Cable Television, Inc. and subsidiary as of December 31, 2001, and the results
of their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

As disclosed in Note 2 to the accompanying consolidated financial statements,
the Company has restated the accompanying consolidated balance sheet as of
December 31, 2001, and the related statements of operations and comprehensive
loss, shareholders deficit and cash flows for the year then ended which
consolidated financial statements before the restatement, were previously
audited by other independent auditors who have ceased operations.

As explained in Note 7 to the consolidated financial statements, effective
January 1, 2001, the Company changed its method of accounting for interest rate
swap agreements.

| |  |             
| |  | ------------
| |  | /s/ KPMG LLP

Seattle, Washington
October 2, 2002

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Report of Independent Public Accountants

To the Shareholder of
Northland Cable Television, Inc.:

We have audited the accompanying consolidated balance sheets of Northland Cable
Television, Inc. (a Washington corporation and a wholly owned subsidiary of
Northland Telecommunications Corporation) and subsidiary as of December 31,
2001 and 2000, and the related consolidated statements of operations, changes
in shareholders deficit and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements are the
responsibility of the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Northland Cable Television,
Inc. and subsidiary as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

As explained in Note 7 to the financial statements,
effective January 1, 2001, the Company changed its method of
accounting for interest rate swap agreements.

| |  |                        
| |  | -----------------------
| |  | /s/ Arthur Andersen LLP

Seattle, Washington
March 1, 2002

This audit report of Arthur Andersen LLP, our former independent public
accountants, is a copy of the original report dated March 1, 2002 rendered by
Arthur Andersen LLP on our consolidated financial statements included in our
Form 10-K filed on April 1, 2002, and has not been reissued by Arthur Andersen
LLP since that date. Our consolidated financial statements for the year ended
December 31, 2001 have been re-audited by and are reported on by KPMG LLP at
page 31 of this amended Annual Report on Form 10-K/A. We are including this
copy of the March 1, 2002 Arthur Andersen LLP audit report pursuant to Rule
2-02 (e) of Regulation S-X under the Securities Act of 1933.

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Northland Cable Television, Inc. and Subsidiary
(A wholly owned subsidiary of Northland Telecommunications Corporation)

Consolidated Balance Sheets  December 31, 2001 and 2000

ASSETS

|                                           |                                                                                                      |                      |             |              |             |      |             |             |             | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------- | -------------------- | ----------- | ------------ | ----------- | ---- | ----------- | ----------- | ----------- | 
|                                           |                                                                                                      |                      |             | December 31,
|                                           |                                                                                                      |                      |             |             
|                                           |                                                                                                      |                      |             | 2001         |             | 2000
|                                           |                                                                                                      |                      |             |              |             |     
|                                           |                                                                                                      |                      |             | (restated)   |             |      |             |            
|CURRENT ASSETS:                            |                                                                                                      |                      |             |              |             |      |             |            
|                                           | Cash                                                                                                 |                      | $           | 2,724,099    |             |      | $           | 2,551,425   |            
|                                           | Due from affiliates                                                                                  |                      |             | 295,650      |             |      |             | 1,160,446   |            
|                                           | Accounts receivable                                                                                  |                      |             | 3,437,560    |             |      |             | 2,187,586   |            
|                                           | Prepaid expenses                                                                                     |                      |             | 547,480      |             |      |             | 571,020     |            
|                                           |                                                                                                      |                      |             |              |             |      |             |            
|                                           |                                                                                                      | Total current assets |             |              | 7,004,789   |      |             |             | 6,470,477   | 
|                                           |                                                                                                      |                      |             |              |             |      |             |            
|INVESTMENT IN CABLE TELEVISION PROPERTIES: |                                                                                                      |                      |             |              |             |      |             |            
|                                           | Property and equipment, at cost                                                                      |                      |             | 110,755,761  |             |      |             | 104,448,059 |            
|                                           | Less  Accumulated depreciation                                                                      |                      |             | (53,518,610  | )           |      |             | (48,315,474 | )          
|                                           |                                                                                                      |                      |             |              |             |      |             |            
|                                           |                                                                                                      |                      | 57,237,151  |              |             |      | 56,132,585  |            
|                                           | Franchise agreements (net of accumulated
amortization of $47,705,273 and
$40,107,541, respectively)  |                      |             | 53,229,933   |             |      |             | 63,283,045  |            
|                                           | Goodwill (net of accumulated amortization
of $2,407,104 and $2,393,494,
respectively)                |                      |             | 3,937,329    |             |      |             | 4,530,939   |            
|                                           | Loan fees (net of accumulated
amortization of $1,970,213 and
$1,296,338, respectively)               |                      |             | 3,861,735    |             |      |             | 4,491,590   |            
|                                           | Other intangible assets (net of
accumulated amortization of $3,976,683
and $3,410,126, respectively) |                      |             | 655,257      |             |      |             | 1,089,038   |            
|                                           |                                                                                                      |                      |             |              |             |      |             |            
|                                           |                                                                                                      |                      | 118,921,405 |              |             |      | 129,527,197 |            
|                                           |                                                                                                      |                      |             |              |             |      |             |            
|                                           |                                                                                                      | Total assets         |             | $            | 125,926,194 |      |             | $           | 135,997,674 | 
|                                           |                                                                                                      |                      |             |              |             |      |             |            

(Continued)

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Northland Cable Television, Inc. and Subsidiary
(A wholly owned subsidiary of Northland Telecommunications Corporation)

Consolidated Balance Sheets  December 31, 2001 and 2000 (Continued)

LIABILITIES AND SHAREHOLDERS DEFICIT

|                                        |                                                                                                                                         |                                             |             |              |             |      |             |             |             |  
|--------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ----------- | ------------ | ----------- | ---- | ----------- | ----------- | ----------- | -
|                                        |                                                                                                                                         |                                             |             | December 31,
|                                        |                                                                                                                                         |                                             |             |             
|                                        |                                                                                                                                         |                                             |             | 2001         |             | 2000
|                                        |                                                                                                                                         |                                             |             |              |             |     
|                                        |                                                                                                                                         |                                             |             | (restated)   |             |      |             |            
|CURRENT LIABILITIES:                    |                                                                                                                                         |                                             |             |              |             |      |             |            
|                                        | Accounts payable                                                                                                                        |                                             | $           | 1,103,869    |             |      | $           | 754,908     |            
|                                        | Subscriber prepayments                                                                                                                  |                                             |             | 1,898,112    |             |      |             | 1,549,945   |            
|                                        | Accrued expenses                                                                                                                        |                                             |             | 6,395,484    |             |      |             | 6,951,496   |            
|                                        | Converter deposits                                                                                                                      |                                             |             | 157,534      |             |      |             | 122,674     |            
|                                        | Due to affiliates                                                                                                                       |                                             |             | 242,741      |             |      |             | 103,098     |            
|                                        | Interest rate derivative                                                                                                                |                                             |             | 1,919,587    |             |      |             |            |            
|                                        |                                                                                                                                         |                                             |             |              |             |      |             |            
|                                        |                                                                                                                                         | Total current liabilities                   |             |              | 11,717,327  |      |             |             | 9,482,121   |  
|NOTES PAYABLE                           |                                                                                                                                         |                                             | 171,031,182 |              |             |      | 182,540,000 |            
|                                        |                                                                                                                                         |                                             |             |              |             |      |             |            
|                                        |                                                                                                                                         | Total liabilities                           |             |              | 182,748,509 |      |             |             | 192,022,121 |  
|                                        |                                                                                                                                         |                                             |             |              |             |      |             |            
|COMMITMENTS AND CONTINGENCIES (Note 11) |                                                                                                                                         |                                             |             |              |             |      |             |            
|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   |             |      |             | 11,560,527  |            
|                                        | Accumulated other comprehensive income                                                                                                  |                                             |             | 268,000      |             |      |             |            |            
|                                        | Accumulated deficit                                                                                                                     |                                             |             | (69,449,692  | )           |      |             | (67,584,974 | )          
|                                        |                                                                                                                                         |                                             |             |              |             |      |             |            
|                                        |                                                                                                                                         | Total shareholders deficit                 |             |              | (56,822,315 | )    |             |             | (56,024,447 | )
|                                        |                                                                                                                                         |                                             |             |              |             |      |             |            
|                                        |                                                                                                                                         | Total liabilities and shareholders deficit |             | $            | 125,926,194 |      |             | $           | 135,997,674 |  
|                                        |                                                                                                                                         |                                             |             |              |             |      |             |            

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)

Consolidated Statements of Operations and Comprehensive Loss
For the Years Ended December 31, 2001, 2000 and 1999

|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |             |            | 
|---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ---------- | ----------- | ---------- | ---- | ----------- | ----------- | ---------- | - | ----------- | ----------- | ---------- | 
|                                   |                                                                                                                                                              |                            |            | 2001        |            | 2000 |             | 1999       
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |            
|                                   |                                                                                                                                                              |                            |            | (restated)  |            |      |             |             |            |   |             |            
|REVENUES:                          |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   | Service revenues                                                                                                                                             |                            | $          | 62,067,659  |            |      | $           | 60,144,509  |            |   | $           | 58,216,550  |           
|                                   | Programming and production revenues from affiliates                                                                                                          |                            |            |            |            |      |             | 363,475     |            |   |             | 631,865     |           
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   |                                                                                                                                                              | Total revenues             |            |             | 62,067,659 |      |             |             | 60,507,984 |   |             |             | 58,848,415 | 
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|OPERATING EXPENSES:                |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   | Cable system operations (including $221,840,
$305,673 and $236,867, net, paid to affiliates),
excluding depreciation and amortization expense
recorded below |                            |            | 22,119,572  |            |      |             | 20,950,091  |            |   |             | 19,326,047  |           
|                                   | General and administrative (including $737,840,
$1,682,160 and $2,584,442, net, paid to
affiliates)                                                          |                            |            | 9,966,491   |            |      |             | 10,348,509  |            |   |             | 10,724,647  |           
|                                   | Management fees paid to parent                                                                                                                               |                            |            | 3,103,383   |            |      |             | 3,002,889   |            |   |             | 2,896,228   |           
|                                   | Depreciation and amortization                                                                                                                                |                            |            | 20,737,176  |            |      |             | 19,829,737  |            |   |             | 19,340,321  |           
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   |                                                                                                                                                              | Total operating expenses   |            |             | 55,926,622 |      |             |             | 54,131,226 |   |             |             | 52,287,243 | 
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   |                                                                                                                                                              | Income from operations     |            |             | 6,141,037  |      |             |             | 6,376,758  |   |             |             | 6,561,172  | 
|OTHER INCOME (EXPENSE):            |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   | Interest expense and amortization of loan fees                                                                                                               |                            |            | (18,522,714 | )          |      |             | (18,364,730 | )          |   |             | (17,842,346 | )         
|                                   | Unrealized loss on interest rate swaps                                                                                                                       |                            |            | (2,187,587  | )          |      |             |            |            |   |             |            |           
|                                   | Gain (loss) on sale                                                                                                                                          |                            |            | 12,759,329  |            |      |             | (590,156    | )          |   |             | (671,398    | )         
|                                   | Other, net (Note 9)                                                                                                                                          |                            |            | (54,783     | )          |      |             | 402,628     |            |   |             | 176,291     |           
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|Net loss before extraordinary item |                                                                                                                                                              |                            | (1,864,718 | )           |            |      | (12,175,500 | )           |            |   | (11,776,281 | )          
|EXTRAORDINARY ITEM:                |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   | Loss on extinguishment of debt                                                                                                                               |                            |            |            |            |      |             | (2,092,943  | )          |   |             |            |           
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|NET LOSS                           |                                                                                                                                                              | $                          | (1,864,718 | )           |            | $    | (14,268,443 | )           |            | $ | (11,776,281 | )          
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|OTHER COMPREHENSIVE INCOME:        |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   | Cumulative effect of change in accounting principle                                                                                                          |                            |            | 689,000     |            |      |             |            |            |   |             |            |           
|                                   | Reclassification of accumulated other
comprehensive income to unrealized loss on
interest rate swaps                                                         |                            |            | (421,000    | )          |      |             |            |            |   |             |            |           
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|                                   |                                                                                                                                                              | Other comprehensive income |            |             | 268,000    |      |             |             |           |   |             |             |           | 
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            
|TOTAL COMPREHENSIVE LOSS           |                                                                                                                                                              | $                          | (1,596,718 | )           |            | $    | (14,268,443 | )           |            | $ | (11,776,281 | )          
|                                   |                                                                                                                                                              |                            |            |             |            |      |             |             |            |   |             |            

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

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Northland Cable Television, Inc. and Subsidiary
(A wholly owned subsidiary of Northland Telecommunications Corporation)

Consolidated Statements of Changes in Shareholders Deficit
For the Years Ended December 31, 2001, 2000 and 1999

|                                      |                                                         |  |                  |   |                     |   |             |         |         |   |         |         |  |   |             |             |   |   |             |             |  
|------------------------------------- | ------------------------------------------------------- |  | ---------------- | - | ------------------- | - | ----------- | ------- | ------- | - | ------- | ------- |  | - | ----------- | ----------- | - | - | ----------- | ----------- | -
|                                      |                                                         |  | Common Stock and |   |                     |   |             |         |         |   |         |         |  |   |            
|                                      |                                                         |  | Additional       |   |                     |   |             |         |         |   |         |         |  |   |            
|                                      |                                                         |  | Paid-In Capital  |   | Accumulated         |   |             |         |         |   |         |         | 
|                                      |                                                         |  |                  |   | Other Comprehensive |   | Accumulated |         |         |   |        
|                                      |                                                         |  | Shares           |   | Amount              |   | Income      |         | Deficit |   | Total  
|                                      |                                                         |  |                  |   |                     |   |             |         |         |   |        
|BALANCE, December 31, 1998            |                                                         |  | 10,000           |   |                     | $ | 11,560,527  |         |         | $ |        |         |  | $ | (41,540,250 | )           |   | $ | (29,979,723 | )          
|                                      | Net loss                                                |  |                  |  |                     |   |             |        |         |   |         |        |  |   |             | (11,776,281 | ) |   |             | (11,776,281 | )
|                                      |                                                         |  |                  |   |                     |   |             |         |         |   |         |         |  |   |             |             |   |   |             |            
|BALANCE, December 31, 1999            |                                                         |  | 10,000           |   |                     |   | 11,560,527  |         |         |   |        |         |  |   | (53,316,531 | )           |   |   | (41,756,004 | )          
|                                      | Net loss                                                |  |                  |  |                     |   |             |        |         |   |         |        |  |   |             | (14,268,443 | ) |   |             | (14,268,443 | )
|                                      |                                                         |  |                  |   |                     |   |             |         |         |   |         |         |  |   |             |             |   |   |             |            
|BALANCE, December 31, 2000            |                                                         |  | 10,000           |   |                     |   | 11,560,527  |         |         |   |        |         |  |   | (67,584,974 | )           |   |   | (56,024,447 | )          
|                                      | Equity contribution in-kind from Parent                 |  |                  |  |                     |   |             | 798,850 |         |   |         |        |  |   |             |            |   |   |             | 798,850     |  
|                                      | Net loss and other comprehensive
income, net (restated) |  |                  |  |                     |   |             |        |         |   |         | 268,000 |  |   |             | (1,864,718  | ) |   |             | (1,596,718  | )
|                                      |                                                         |  |                  |   |                     |   |             |         |         |   |         |         |  |   |             |             |   |   |             |            
|BALANCE, December 31, 2001
(restated) |                                                         |  | 10,000           |   |                     | $ | 12,359,377  |         |         | $ | 268,000 |         |  | $ | (69,449,692 | )           |   | $ | (56,822,315 | )          
|                                      |                                                         |  |                  |   |                     |   |             |         |         |   |         |         |  |   |             |             |   |   |             |            

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

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Northland Cable Television, Inc. and Subsidiary
(A wholly owned subsidiary of Northland Telecommunications Corporation)

Consolidated Statements of Cash Flows
For the Years Ended December 31, 2001, 2000 and 1999

|                                      |                                                                                 |                                                               |                                |                                                     |             |            |            |             |            |          |             |             |            |          |            |  
|------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------ | --------------------------------------------------- | ----------- | ---------- | ---------- | ----------- | ---------- | -------- | ----------- | ----------- | ---------- | -------- | ---------- | -
|                                      |                                                                                 |                                                               |                                |                                                     |             | 2001       |            | 2000        |            | 1999    
|                                      |                                                                                 |                                                               |                                |                                                     |             |            |            |             |            |         
|                                      |                                                                                 |                                                               |                                |                                                     |             | (restated) |            |             |            |          |             |             |            |         
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                                                 |                                                               |                                |                                                     |             |            |            |             |            |          |             |            
|                                      | Net loss                                                                        |                                                               | $                              | (1,864,718                                          | )           |            | $          | (14,268,443 | )          |          | $           | (11,776,281 | )         
|                                      | Adjustments to reconcile net loss to net cash provided by operating
activities- |                                                               |                                |                                                     |             |            |            |             |            |          |             |             |           
|                                      |                                                                                 | Depreciation and amortization                                 |                                |                                                     | 20,737,176  |            |            |             | 19,829,737 |          |             |             | 19,340,321 |         
|                                      |                                                                                 | Amortization of loan costs                                    |                                |                                                     | 673,875     |            |            |             | 818,867    |          |             |             | 914,554    |         
|                                      |                                                                                 | Loss on extinguishment of debt                                |                                |                                                     |            |            |            |             | 2,092,943  |          |             |             |           |         
|                                      |                                                                                 | (Gain) loss on disposal of assets                             |                                |                                                     | (12,759,329 | )          |            |             | 590,156    |          |             |             | 671,398    |         
|                                      |                                                                                 | Unrealized loss on interest rate swaps                        |                                |                                                     | 2,187,587   |            |            |             |           |          |             |             |           |         
|                                      |                                                                                 | Changes in certain assets and liabilities, net of acquisition |                                |                                                     |             |            |            |             |            |          |             |             |            |         
|                                      |                                                                                 |                                                               | Due to/from affiliates         |                                                     |             | 1,053,288  |            |             |            | (978,229 | )           |             |            | (218,909 | )         
|                                      |                                                                                 |                                                               | Accounts receivable            |                                                     |             | (19,146    | )          |             |            | 38,671   |             |             |            | (189,897 | )         
|                                      |                                                                                 |                                                               | Prepaid expenses               |                                                     |             | 31,593     |            |             |            | (56,137  | )           |             |            | (229,292 | )         
|                                      |                                                                                 |                                                               | Accounts payable               |                                                     |             | 412,588    |            |             |            | (171,026 | )           |             |            | (152,830 | )         
|                                      |                                                                                 |                                                               | Subscriber prepayments         |                                                     |             | 159,036    |            |             |            | (280,286 | )           |             |            | (13,739  | )         
|                                      |                                                                                 |                                                               | Other current liabilities, net |                                                     |             | (532,603   | )          |             |            | 922,304  |             |             |            | (210,664 | )         
|                                      |                                                                                 |                                                               |                                |                                                     |             |            |            |             |            |          |             |            
|                                      |                                                                                 |                                                               |                                | Net cash provided by operating activities           |             |            | 10,079,347 |             |            |          | 8,538,557   |             |            |          | 8,134,661  |  
|                                      |                                                                                 |                                                               |                                |                                                     |             |            |            |             |            |          |             |            
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                                                 |                                                               |                                |                                                     |             |            |            |             |            |          |             |            
|                                      | Acquisition of cable systems                                                    |                                                               |                                | (3,855,373                                          | )           |            |            | (3,100,000  | )          |          |             |            |           
|                                      | Investment in property and equipment                                            |                                                               |                                | (13,103,679                                         | )           |            |            | (9,816,559  | )          |          |             | (7,061,920  | )         
|                                      | Proceeds from disposition of cable systems                                      |                                                               |                                | 18,526,332                                          |             |            |            |            |            |          |             |            |           
|                                      | Insurance proceeds and other                                                    |                                                               |                                | 78,885                                              |             |            |            | 98,007      |            |          |             | 26,235      |           
|                                      | Franchise fees and other intangibles                                            |                                                               |                                |                                                    |             |            |            | (138,426    | )          |          |             | (133,898    | )         
|                                      |                                                                                 |                                                               |                                |                                                     |             |            |            |             |            |          |             |            
|                                      |                                                                                 |                                                               |                                | Net cash provided by (used in) investing activities |             |            | 1,646,165  |             |            |          | (12,956,978 | )           |            |          | (7,169,583 | )
|                                      |                                                                                 |                                                               |                                |                                                     |             |            |            |             |            |          |             |            

(Continued)

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Northland Cable Television, Inc. and Subsidiary
(A wholly owned subsidiary of Northland Telecommunications Corporation)

Consolidated Statements of Cash Flows
For the Years Ended December 31, 2001, 2000 and 1999 (Continued)

|                                                  |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |            |            |            |  
|------------------------------------------------- | ---------------------------------------- | -------------------------------- | --------------------------------------------------- | ----------- | ---------- | ----------- | --------- | ----------- | ---------- | --------- | ---------- | ---------- | ---------- | ---------- | -
|                                                  |                                          |                                  |                                                     |             | 2001       |             | 2000      |             | 1999      
|                                                  |                                          |                                  |                                                     |             |            |             |           |             |           
|                                                  |                                          |                                  |                                                     |             | (restated) |             |           |             |            |           |            |            |           
|CASH FLOWS FROM FINANCING ACTIVITIES:             |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |           
|                                                  | Proceeds from notes payable              |                                  | $                                                   | 6,800,000   |            |             | $         | 85,640,000  |            |           | $          |           |           
|                                                  | Principal payments on notes payable, net |                                  |                                                     | (18,308,818 | )          |             |           | (77,955,103 | )          |           |            | (2,250,000 | )         
|                                                  | Loan fees                                |                                  |                                                     | (44,020     | )          |             |           | (2,081,101  | )          |           |            | (100,000   | )         
|                                                  |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |           
|                                                  |                                          |                                  | Net cash (used
in) provided by
financing
activities |             |            | (11,552,838 | )         |             |            | 5,603,796 |            |            |            | (2,350,000 | )
|                                                  |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |           
|INCREASE (DECREASE) IN CASH                       |                                          |                                  | 172,674                                             |             |            |             | 1,185,375 |             |            |           | (1,384,922 | )         
|CASH, beginning of year                           |                                          |                                  | 2,551,425                                           |             |            |             | 1,366,050 |             |            |           | 2,750,972  |           
|                                                  |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |           
|CASH, end of year                                 |                                          | $                                | 2,724,099                                           |             |            | $           | 2,551,425 |             |            | $         | 1,366,050  |           
|                                                  |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION: |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |           
|                                                  |                                          | Cash paid for interest           |                                                     | $           | 17,678,819 |             |           | $           | 16,515,395 |           |            | $          | 16,901,071 |           
|                                                  |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |           
|                                                  |                                          | Cash paid for state income taxes |                                                     | $           | 3,192      |             |           | $           | 25,136     |           |            | $          | 28,746     |           
|                                                  |                                          |                                  |                                                     |             |            |             |           |             |            |           |            |           

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:

In association with the acquisition of the cable television systems, the
Company assumed certain working capital balances related to the accounts
receivable, prepaid expenses, accrued liabilities, deposits, and subscriber
prepayments. The Company also received an in-kind distribution from its parent
in the amount of $798,850.

A hold back note of approximately $1,000,000 will be held in escrow until June
of 2002 related to the sale of the Bainbridge Island system.

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

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Northland Cable Television, Inc. and Subsidiary
(A wholly owned subsidiary of Northland Telecommunications Corporation)

Notes to Consolidated Financial Statements
For the year ended December 31, 2001

1. Organization

Formation and Business

Northland Cable Television, Inc. (NCTV), a Washington corporation, was formed
to own and operate cable television systems. As of December 31, 2001, NCTV had
91 nonexclusive franchises to operate cable television systems. These
franchises expire at various dates through 2022.

Northland Cable News, Inc. (NCN), a Washington corporation, which was formed to
develop and distribute programming to certain of the Companys affiliated
entities, is a wholly owned subsidiary of NCTV. NCN ceased its operations as
of January 1, 2001. NCTV and NCN are collectively referred to as the Company.

The Company is subject to certain risks as a cable television operator. These
include competition from alternative technologies (e.g., satellite),
requirements to renew its franchises, availability of capital and note payable
covenants.

Related Companies

The Company and its affiliates, Northland Communications Corporation and
subsidiary (NCC); Northland Cable Services Corporation and subsidiary (NCSC);
and Northland Media, Inc. and subsidiaries (NMI) are wholly owned subsidiaries
of Northland Telecommunications Corporation (NTC or Parent). NCC is the
managing general partner of two limited partnerships, and is the managing
member of Northland Cable Networks, LLC (the LLC), all of which own and operate
cable television systems. Additionally, NCC owns and operates cable systems
through its wholly owned subsidiary, Northland Cable Properties, Inc. (NCPI).
Northland Cable Ventures, LLC, is a majority-owned subsidiary of NCPI which was
formed to own and operate cable television systems. NCSC is the parent company
of Cable Ad-Concepts, Inc. (CAC). NCSC provides billing services and technical
support to cable systems owned by the limited partnerships and the LLC, which
are managed by NCC, and wholly owned systems of the Company and NCC. CAC
develops and produces video commercial advertisements to be cablecast on
Northland affiliated cable systems. NMI was formed as a holding company to own
and operate AM radio stations.

2. Restatement

In July 2002, the Company announced a restatement for the year ended December
31, 2001, and for the quarter ended March 31, 2002. The restatement is a
result of a misclassification in the implementation of Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activity, on January 1, 2001 for those interest rate swap agreements
that existed at implementation. Correction of this misclassification resulted
in the reclassification of a non-cash item from the Companys statement of
operations to accumulated other comprehensive income, a component of
shareholders deficit, with subsequent amortization into earnings over the
remaining term of the swap agreements. This restatement has no impact on
income from operations, earnings before interest, taxes, depreciation and
amortization (EBITDA) or the Companys calculations of or compliance with the
restrictive covenants under the terms of its loan agreement for the periods
affected. The effect of the restatement for the year ended December 31, 2001
is as follows:

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|                            |                        |                                             |             |                   |             |             |             |   |             |  
|--------------------------- | ---------------------- | ------------------------------------------- | ----------- | ----------------- | ----------- | ----------- | ----------- | - | ----------- | -
|                            |                        |                                             |             | December 31, 2001
|                            |                        |                                             |             |                  
|                            |                        |                                             |             | As Reported       |             | As Restated
|                            |                        |                                             |             |                   |             |            
|BALANCE SHEET INFORMATION:  |                        |                                             |             |                   |             |             |             |  
|Total assets                |                        | $                                           | 125,926,194 |                   |             | $           | 125,926,194 |  
|                            |                        |                                             |             |                   |             |             |             |  
|Total liabilities           |                        | $                                           | 182,748,509 |                   |             | $           | 182,748,509 |  
|                            |                        |                                             |             |                   |             |             |             |  
|                            | Shareholders deficit: |                                             |             |                   |             |             |             |   |            
|                            |                        | Common stock and additional paid in capital |             |                   | 12,359,377  |             |             |   | 12,359,377  |  
|                            |                        | Accumulated deficit                         |             |                   | (69,181,692 | )           |             |   | (69,449,692 | )
|                            |                        | Accumulated other comprehensive income      |             |                   |            |             |             |   | 268,000     |  
|                            |                        |                                             |             |                   |             |             |             |  
|Total shareholders deficit |                        | $                                           | (56,822,315 | )                 |             | $           | (56,822,315 | )
|                            |                        |                                             |             |                   |             |             |             |  

|                                                                                           |                                                                                                      |                            |            |                                      |   |             |            |          |         | 
|------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ------------------------------------ | - | ----------- | ---------- | -------- | ------- | 
|                                                                                           |                                                                                                      |                            |            | For the year ended December 31, 2001
|                                                                                           |                                                                                                      |                            |            |                                     
|                                                                                           |                                                                                                      |                            |            | As Reported                          |   | As Restated
|                                                                                           |                                                                                                      |                            |            |                                      |   |            
|INCOME STATEMENT INFORMATION:                                                              |                                                                                                      |                            |            |                                      |   |             |            |         
|Service revenues                                                                           |                                                                                                      | $                          | 62,067,659 |                                      |   | $           | 62,067,659 |         
|Income from operations                                                                     |                                                                                                      |                            | 6,141,037  |                                      |   |             | 6,141,037  |         
|Unrealized loss on interest rate swaps                                                     |                                                                                                      |                            | (2,608,587 | )                                    |   |             | (2,187,587 | )       
|Net loss before cumulative effect of change in accounting principle and
extraordinary item |                                                                                                      |                            | (2,285,718 | )                                    |   |             | (1,864,718 | )       
|Cumulative effect of change in accounting principle                                        |                                                                                                      |                            | 689,000    |                                      |   |             |           |         
|                                                                                           |                                                                                                      |                            |            |                                      |   |             |            |         
|Net loss                                                                                   |                                                                                                      |                            | (1,596,718 | )                                    |   |             | (1,864,718 | )       
|                                                                                           |                                                                                                      |                            |            |                                      |   |             |            |         
|Other comprehensive income:                                                                |                                                                                                      |                            |            |                                      |   |             |            |         
|                                                                                           | Cumulative effect of change in accounting principle                                                  |                            |            |                                     |   |             |            | 689,000  |        
|                                                                                           | Reclassification of accumulated other comprehensive income to unrealized
loss on interest rate swaps |                            |            |                                     |   |             |            | (421,000 | )      
|                                                                                           |                                                                                                      |                            |            |                                      |   |             |            |         
|                                                                                           |                                                                                                      | Other comprehensive income |            |                                      |  |             |            |          | 268,000 | 
|                                                                                           |                                                                                                      |                            |            |                                      |   |             |            |         
|Total comprehensive loss                                                                   |                                                                                                      | $                          | (1,596,718 | )                                    |   | $           | (1,596,718 | )       
|                                                                                           |                                                                                                      |                            |            |                                      |   |             |            |         

3. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of NCTV and its
wholly owned subsidiary, NCN. Significant intercompany accounts and
transactions have been eliminated.

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Acquisition of Cable Television Systems

Cable television system acquisitions are accounted for as purchase transactions
and their cost is allocated first, to the estimated fair market value of net
tangible assets acquired; then to noncompetition agreements, franchise
agreements and other identifiable intangible costs. Any excess is allocated to
goodwill.

Cash and Cash Equivalents

Cash and cash equivalents include cash and investments in short-term, highly
liquid securities, which have maturities when purchased of three months or
less.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Costs
of additions and substantial improvements to property and equipment are
capitalized. Expenditures for maintenance and repairs are charged
to operating expense as incurred. Depreciation is computed using the
straight-line method over the equipments estimated useful lives. The Company
evaluates the depreciation periods of property and equipment to determine
whether events or circumstances warrant revised estimates of useful lives.

The costs associated with the construction of cable transmission and
distribution facilities and new cable service installations are capitalized.
Costs include direct labor and materials as well as certain indirect costs. The
amount of indirect costs that are capitalized, which include employee benefits,
travel and other costs, are estimated based on historical construction costs.
The Company periodically performs evaluations of these estimates to determine
whether they are reflective of current construction costs. At the time of
retirements, sales or other dispositions of property, the original cost and
related accumulated depreciation are removed from the respective accounts, and
the gains and losses are presented in the statement of operations and
comprehensive loss.

Depreciation of property and equipment is provided using the straight-line
method over the following estimated service lives:

|                                           |  |            |  | 
|------------------------------------------ |  | ---------- |  | 
|Buildings                                  |  | 20 years  
|Distribution plant                         |  | 10 years  
|Other equipment and leasehold improvements |  | 1-20 years

The Company periodically reviews the carrying value of its long-lived assets,
including property, equipment and intangible assets, whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. As
of December 31, 2001, there has been no indication of such impairment.

Intangible Assets

Costs assigned to franchise agreements, loan fees and other intangibles are
being amortized using the straight-line method. Loan fees are deferred and
amortized on a straight line basis, which approximates the effective interest
rate method, over the life of the loan. Useful lives for these intangible
assets are as follows (current weighted average useful life of 11.38 years):

|                                                                             |  |            |  | 
|---------------------------------------------------------------------------- |  | ---------- |  | 
|Franchise agreements (current weighted average useful life of
10.01 years)   |  | 9-20 years
|Other intangible assets (current weighted average useful life
of 7.17 years) |  | 5-10 years
|Goodwill                                                                     |  | 40 years  

The Company recorded amortization expense of $11,136,346, $11,170,890 and
$11,152,280, in 2001, 2000 and 1999, respectively.

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Amortization expense for each of the next five years is expected to be
approximately as follows:

|     |  |   |            | 
|---- |  | - | ---------- | 
|2002 |  | $ | 11,400,000 | 
|2003 |  |   | 11,000,000 | 
|2004 |  |   | 10,700,000 | 
|2005 |  |   | 9,200,000  | 
|2006 |  |   | 8,200,000  | 
|     |  |   |            | 
|     |  | $ | 50,500,000 | 
|     |  |   |            | 

Self-Insurance

NCTV began self-insuring for aerial and underground plant in 1996. Beginning
in 1997, NCTV began making quarterly contributions into an insurance fund
maintained by NTC which covers all Northland entities and would defray a
portion of any loss should NCTV be faced with a significant uninsured loss. To
the extent NCTVs losses exceed the funds balance, NCTV would absorb any such
loss. If NCTV were to sustain a material uninsured loss, such reserves could
be insufficient to fully fund such a loss. The capital cost of replacing such
equipment and physical plant, could have a material adverse effect on NCTV, its
financial condition, prospects and debt service ability.

Amounts paid to NTC, which maintains the fund for the Company and its
affiliates, are expensed as incurred and are included in the consolidated
statements of operations. To the extent a loss has been incurred related to
risks that are self-insured, the Company records an expense and an associated
liability for the amount of the loss, net of any amounts to be drawn from the
fund. For the years ended December 31, 2001, 2000 and 1999, the Company was
charged $18,728, $76,244 and $76,338, respectively, by the fund. As of
December 31, 2001, the fund had a balance of $614,057.

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. Local spot
advertising revenues earned were $2,744,460, $2,770,571 and $2,425,747,
respectively, in 2001, 2000 and 1999.

Derivatives

The Company has only limited involvement with derivative instruments and does
not use them for trading purposes. They are used to manage well-defined
interest rate risks. The Company periodically enters into interest rate swap
agreements with major banks or financial institutions (typically its bank) in
which the Company pays a fixed rate and receives a floating rate with the
interest payments being calculated on a notional amount.

The Company is exposed to credit related losses in the event of nonperformance
by counterparties to financial instruments but does not expect any
counterparties to fail to meet their obligations, as the Company currently
deals only with its bank. The exposure in a derivative contract is the net
difference between what each party is required to pay based on the contractual
terms against the notional amount of the contract, which in the Companys case,
are interest rates.

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at fair value. SFAS No. 133 also
established new accounting rules for hedging instruments which, depending on
the nature of the hedge, require that changes in the fair value of derivatives
either be offset against the change in fair value of the hedged assets or
liabilities through earnings, or be recognized in other comprehensive income
until the hedged item is recognized in earnings.

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The Company has elected not to designate its derivatives as hedges under SFAS
No. 133. Accordingly, subsequent to the effective date of SFAS No. 133, the
Company has recorded any change in the fair value of these agreements in its
statements of operations and a corresponding asset/liability on the balance
sheet.

Advertising Costs

The Company expenses advertising costs as they are incurred. Advertising
expense was $1,425,061, $1,574,499 and $1,329,726 in 2001, 2000 and 1999,
respectively.

Segment Information

The Company has adopted Statement of Financial Accounting Standards No. 131,
Disclosures About Segments of an Enterprise and Related Information. The
Company manages its business under one reporting segment, telecommunications
services. As such, all operating decisions are based upon the company
operating under a single segment. Additionally, all of its activities take
place in the United States.

Concentration of Risk and Fair
Value Disclosure

The Company is subject to concentrations of credit risk from cash investments
on deposit at various financial institutions that at times exceed insured
limits by the Federal Deposit Insurance Corporation. This exposes the Company
to potential risk of loss in the event the institution becomes insolvent.

Financial instruments consist of cash, interest rate swap agreements and notes
payable. The fair value of cash approximates its carrying value. The fair
value of interest rate swap agreements is the estimated amount that a bank
would receive or pay to terminate the swap agreement at the reporting date and
is equal to their carrying value. The fair value of the notes payable
approximates the carrying value because of its variable interest rate nature
(Note 8).

Recently Issued Accounting Pronouncements

Statement of Financial Accounting Standards No. 141 and 142 In June 2001, the
Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business
Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
No. 141 prospectively prohibits the pooling of interest method of accounting
for business combinations initiated after June 30, 2001. SFAS No. 142
establishes a new method of testing goodwill for impairment on an annual basis
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. The
amortization of existing goodwill will cease on December 31, 2001. Any
goodwill resulting from acquisitions completed after June 30, 2001 will not be
amortized. SFAS No. 141 is not expected to have a material impact on the
Companys financial position, results of operations or cash flows. The
adoption of SFA No. 142 will result in the Companys discontinuation of
amortization of its goodwill, approximately $170,000 a year. In addition, the
Company is evaluating its other intangible assets to determine whether or not
they meet the definition of indefinite lived assets. Assets determined to meet
this definition, would also no longer be amortized as of January 1, 2002. The
Company will be required to test its goodwill and any other assets determined
to have indefinite lives for impairment under the new standard beginning in the
first quarter of 2002, which could have an adverse effect on the Companys
future results of operations if an impairment occurs. The net book value of
the goodwill remaining at December 31, 2001 was $3,937,329.

Statement of Financial Accounting Standards No. 143 In June 2001, the FASB
issued SFAS No. 143 Accounting for Asset Retirement Obligations. SFAS No.
143 requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. Statement No. 143 will be effective for the Company
beginning January 1, 2003. The Company has not yet estimated the impact of
implementation of SFAS No. 143 on its financial position, results of operations
or cash flows.

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Statement of Financial Accounting Standards No. 144 In August 2001, the FASB
issued SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived
Assets. Statement No. 144 addresses financial accounting and reporting for
the impairment of long-lived assets and for long-lived assets to be disposed
of. Statement No. 144 supercedes Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
and supercedes the accounting and reporting provisions of Accounting Principles
Board Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for segments of a business to
be disposed of. Implementation of Statement No. 144, which is effective
January 1, 2002, is not expected to have a material impact on the Companys
financial position, results of operations or cash flows.

Estimates Used in Financial Statement Presentation

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amount 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.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
year presentation.

4. Transactions with Related Parties

Management Fees

The Company pays management fees to NTC equal to 5% of NCTVs gross revenues,
excluding revenues from the sale of cable television systems or franchises.

Reimbursements

NTC provides or causes to be provided certain centralized services to the
Company and other affiliated entities. NTC is entitled to reimbursement from
the Company for various expenses incurred by it or its affiliates on behalf of
the Company allocable to its management of the Company, including travel
expenses, pole and site rental, lease payments, legal expenses, billing
expenses, insurance, governmental fees and licenses, headquarters supplies and
expenses, pay television expenses, equipment and vehicle charges, operating
salaries and expenses, administrative salaries and expenses, postage and office
maintenance. NTC has historically assigned its reimbursement rights to NCC.

The amounts billed to the Company consist of management fees and certain
allocated costs, which are based on costs incurred by affiliates in rendering
the services. The costs of certain services are charged directly to the
Company, based upon the personnel time spent by the employees rendering the
service. The cost of other services is allocated to the Company and affiliates
based upon relative size and revenue. NTC has, from time to time, revised the
allocation used to determine the amount of operating costs charged to the
Company. Management believes that the methods used to allocate services to the
Company are reasonable. However, the amounts charged are not necessarily
indicative of costs that would be incurred if the related services were
provided by a non-affiliated third party. Amounts charged for these services
were $310,931, $1,258,412 and $2,121,890 for 2001, 2000 and 1999, respectively.

NCSC was formed to provide billing system support to cable systems owned and
managed by NCC and NTC. In addition, NCSC provides technical support
associated with the build out and upgrade of Northland affiliated cable
systems. CAC assists in the development of local advertising as well as
billing for video commercial advertisements to be cablecast on Northland
affiliated cable systems. In 2001, 2000, and 1999, the Company paid $781,497,
$788,795, and $729,526 for these services. Of this amount $222,846 and
$143,901 were capitalized in 2001 and 2000, respectively, related to the
build-out and upgrade of cable systems.

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The Company has operating management agreements with affiliated entities
managed by NCC. Under the terms of these agreements, the Company or an
affiliate serves as the managing agent for certain cable television systems and
is reimbursed for certain operating, administrative and programming expenses.
The Company paid $90,098, $84,526 and $43,805, net, under the terms of these
agreements during 2001, 2000 and 1999, respectively.

5. Northland Cable News

As discussed in Note 1, NCN was formed to develop and distribute local news,
sports and information programming to NCTV and certain of the Companys
affiliates. The Companys payment obligations under the $100 million of senior
notes discussed in Note 8 are fully and unconditionally, jointly and severally
guaranteed on a senior subordinated basis by NCN. The guarantee of NCN is
subordinated to the prior payment in full of all senior debt of NCN (as of
December 31, 2001 NCN had no senior debt outstanding) and the amounts for which
NCN will be liable under the guarantee issued from time to time with respect to
senior debt. Management ceased the operations of NCN on January 1, 2001, and
does not believe that this has a material effect on the Companys financial
position, results of operations or financing agreements. Separate financial
statements of NCN have not been presented because management has determined
that they would not be material to financial statement readers. Summary
financial information of NCN is presented below.

|                              |                                                                                                                                               |            |   |                     |        |      |   |            |         | 
|----------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ---------- | - | ------------------- | ------ | ---- | - | ---------- | ------- | 
|                              |                                                                                                                                               |            |   | For the Years Ended
|                              |                                                                                                                                               |            |   | December 31,       
|                              |                                                                                                                                               |            |   |                    
|                              |                                                                                                                                               |            |   | 2000                |        | 1999
|                              |                                                                                                                                               |            |   |                     |        |     
|INCOME STATEMENT INFORMATION: |                                                                                                                                               |            |   |                     |        |      |   |           
|                              | Revenues from affiliates (including
$374,423 and $720,411 of intercompany
revenue eliminated in consolidation in 2000 and 1999, respectively) |            | $ | 737,898             |        |      | $ | 1,352,276  |        
|                              | Operating expenses                                                                                                                            |            |   | (650,004            | )      |      |   | (1,008,165 | )      
|                              | Other, net                                                                                                                                    |            |   | (19,923             | )      |      |   | (19,265    | )      
|                              |                                                                                                                                               |            |   |                     |        |      |   |            |        
|                              |                                                                                                                                               | Net income |   | $                   | 67,971 |      |   | $          | 324,846 | 
|                              |                                                                                                                                               |            |   |                     |        |      |   |            |        

|                           |                                |                   |   |              |         | 
|-------------------------- | ------------------------------ | ----------------- | - | ------------ | ------- | 
|                           |                                |                   |   | December 31,
|                           |                                |                   |   | 2000        
|                           |                                |                   |   |             
|BALANCE SHEET INFORMATION: |                                |                   |   |             
|                           | Current assets                 |                   | $ | 2,229,287    |        
|                           | Less: intercompany elimination |                   |   | (2,018,237   | )      
|                           |                                |                   |   |              |        
|                           |                                | Total assets      |   | $            | 211,050 | 
|                           |                                |                   |   |              |        
|                           |                                | Total liabilities |   | $            | 70,188  | 
|                           |                                |                   |   |              |        

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6. Property and Equipment

|                                |  |              |             |      |  |   |             |  
|------------------------------- |  | ------------ | ----------- | ---- |  | - | ----------- | -
|                                |  | December 31,
|                                |  |             
|                                |  | 2001         |             | 2000
|                                |  |              |             |     
|Land and buildings              |  | $            | 2,470,446   |      |  | $ | 2,343,644   |  
|Distribution plant              |  |              | 102,032,363 |      |  |   | 95,874,216  |  
|Other equipment                 |  |              | 5,692,587   |      |  |   | 5,340,707   |  
|Leasehold improvements          |  |              | 32,033      |      |  |   | 32,033      |  
|Construction in progress        |  |              | 528,332     |      |  |   | 857,459     |  
|                                |  |              |             |      |  |   |             |  
|                                |  |              | 110,755,761 |      |  |   | 104,448,059 |  
|Less  accumulated depreciation |  |              | (53,518,610 | )    |  |   | (48,315,474 | )
|                                |  |              |             |      |  |   |             |  
|                                |  | $            | 57,237,151  |      |  | $ | 56,132,585  |  
|                                |  |              |             |      |  |   |             |  

7. Accrued Expenses

|                        |  |              |           |      |  |   |           | 
|----------------------- |  | ------------ | --------- | ---- |  | - | --------- | 
|                        |  | December 31,
|                        |  |             
|                        |  | 2001         |           | 2000
|                        |  |              |           |     
|Programmer license fees |  | $            | 1,708,679 |      |  | $ | 1,852,847 | 
|Franchise fees          |  |              | 1,189,739 |      |  |   | 1,177,191 | 
|Interest                |  |              | 2,008,405 |      |  |   | 2,178,426 | 
|Taxes                   |  |              | 759,822   |      |  |   | 991,858   | 
|Other                   |  |              | 728,839   |      |  |   | 751,174   | 
|                        |  |              |           |      |  |   |           | 
|                        |  | $            | 6,395,484 |      |  | $ | 6,951,496 | 
|                        |  |              |           |      |  |   |           | 

8. Notes Payable

|                               |  |              |             |      |  |   |             | 
|------------------------------ |  | ------------ | ----------- | ---- |  | - | ----------- | 
|                               |  | December 31,
|                               |  |             
|                               |  | 2001         |             | 2000
|                               |  |              |             |     
|Senior subordinated notes      |  | $            | 100,000,000 |      |  | $ | 100,000,000 | 
|Revised senior credit facility |  |              | 71,031,182  |      |  |   | 82,540,000  | 
|                               |  |              |             |      |  |   |             | 
|                               |  | $            | 171,031,182 |      |  | $ | 182,540,000 | 
|                               |  |              |             |      |  |   |             | 

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Revolving Credit and Term Loan

On August 14, 2000, the Company refinanced its existing senior bank
indebtedness resulting in a charge to expense of approximately $2,350,000 in
loan fees. This amount was offset by a gain of approximately $250,000 on the
termination of certain interest rate swap agreements. The original
indebtedness was repaid with borrowings under the Revised Senior Credit
Facility. The Revised Senior Credit Facility established a $35 million 364-day
revolving credit loan. In August 2001, the revolver converted to a term loan
due on June 30, 2007. The other two components consisted originally of a
seven-year revolving credit loan in the aggregate principal amount of $40
million and a seven-year term loan in the aggregate principal amount of $35
million. The allowable borrowings on the $40 million revolver were reduced by
approximately $17,300,000 during 2001. Amounts outstanding under the Revised
Senior Credit Facility mature on June 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 8.43% (weighted average). Graduated principal
and interest payments are due quarterly, beginning September 30, 2003, until
maturity on June 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 December 31, 2001, $5,660,000 was available for
borrowing by the Company under the revolving credit facility.

Under the revolving credit and term loan agreement, the Company has agreed to
restrictive covenants which require the maintenance of certain ratios, as
defined in the credit agreement, including a Pro Forma Debt Service ratio not
less than 1.25 to 1 and a Leverage Ratio of no greater than 6.50 to 1, among
other restrictions. The Company submits quarterly debt compliance reports to
its creditor under this arrangement. As of December 31, 2001, the Company was
in compliance with the terms of the loan agreement.

Senior Subordinated Notes

In 1997, the Company issued $100,000,000 in principal amount of 10.25% Senior
Subordinated Notes (the Notes) due November 15, 2007. The estimated fair value
of the $100,000,000 Notes at December 31, 2001, was approximately $77,000,000,
based on available market information.

The Notes will be redeemable at the option of the Company, in whole or in part,
at any time on or after November 15, 2002 at the following prices (expressed as
percentages of principal amount) if redeemed during the 12-month period
beginning on November 15 of the years dated below, in each case together with
interest accrued to the redemption date:

|                    |  |            |         |  
|------------------- |  | ---------- | ------- | -
|Year                |  | Percentage
|                    |  |           
|2002                |  |            | 105.125 | %
|2003                |  |            | 103.417 | %
|2004                |  |            | 101.708 | %
|2005 and thereafter |  |            | 100.000 | %

The indenture pursuant to which the Notes were issued, among other things,
limits the ability of the Company and its subsidiaries to incur additional
indebtedness or issue preferred stock; make certain restricted payments; grant
liens on assets; merge, consolidate or transfer substantially all of their
assets; enter into certain transactions with related persons; make certain
payments affecting subsidiaries; sell assets; and issue capital stock of
subsidiaries. Additionally, the Company has agreed to restrictive covenants,
as defined in the indenture, which require the maintenance of certain ratios,
including a Debt to Cash Flow ratio of 6.50 to 1, among other restrictions.
The Company submits quarterly debt compliance reports to a trustee. As of
December 31, 2001, the Company was in compliance with the terms of the Notes.

In the event of a change of control of the Company as defined in the indenture,
holders of the Notes will have the right to require the Company to make an
offer to repurchase such Notes, in whole or in part, at a price of 101% of the
aggregate principal amount thereof plus accrued and unpaid interest to the date
of repurchase.

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Principal Payments

Annual maturities of notes payable after December 31, 2001 based on amounts
outstanding at December 31, 2001 are as follows:

|           |  |   |             | 
|---------- |  | - | ----------- | 
|2002       |  | $ |            | 
|2003       |  |   | 3,500,000   | 
|2004       |  |   | 10,500,000  | 
|2005       |  |   | 14,000,000  | 
|2006       |  |   | 22,819,784  | 
|Thereafter |  |   | 120,211,398 | 
|           |  |   |             | 
|           |  | $ | 171,031,182 | 
|           |  |   |             | 

Interest Rate Swap Agreements

The Company has entered into interest rate swap agreements to reduce the impact
of changes in interest rates. Interest rate swap transactions generally
involve the exchange of fixed and floating interest payment obligations without
exchange of underlying principal amounts. At December 31, 2001, the Company
had outstanding three interest rate swap agreements with its banks, having a
notional principal amount of $82,540,000. These agreements effectively change
the Companys interest rate exposure to fixed rate of 5.97% (weighted average),
plus an applicable margin based on certain financial covenants (the margin at
December 31, 2001 was 2.75%).

|                  |  |            |      |                 |  |   |            | 
|----------------- |  | ---------- | ---- | --------------- |  | - | ---------- | 
|Maturity Date     |  | Fixed Rate |      | Notional Amount
|                  |  |            |      |                
|February 20, 2002 |  |            | 5.17 | %               |  | $ | 42,540,000 | 
|August 19, 2002   |  |            | 6.87 | %               |  | $ | 20,000,000 | 
|August 20, 2002   |  |            | 6.79 | %               |  | $ | 20,000,000 | 

The Company has also entered into a forward swap of $27,000,000, which will
become effective on February 20, 2002. The swap has a fixed rate of 3.17%, and
matures February 20, 2003.

The Company has elected not to designate its derivatives as hedges under SFAS
133. Accordingly, upon adoption on January 1, 2001, the Company recorded the
fair market value of its existing derivatives, $689,000 as accumulated other
comprehensive income, a component of shareholders deficit. This cumulative
effect of a change in accounting principle is being amortized into earnings
over the term of the swap agreements. Each quarter the change in the fair
market value of the Companys derivative instruments has been recorded as
unrealized loss on interest rate swaps. At December 31, 2001, the Company
would have paid approximately $1,920,000 to settle these agreements based on
fair value estimates received.

9. Other, Net

Other, net included as a component of other (expense) income in the
consolidated statements of operations consists of:

|                |  |                                 |          |      |  |      |         |  |  |   |         |  
|--------------- |  | ------------------------------- | -------- | ---- |  | ---- | ------- |  |  | - | ------- | -
|                |  | For the Year Ended December 31,
|                |  |                                
|                |  | 2001                            |          | 2000 |  | 1999
|                |  |                                 |          |      |  |     
|Interest income |  | $                               | 122,705  |      |  | $    | 192,870 |  |  | $ | 205,038 |  
|Other           |  |                                 | (177,488 | )    |  |      | 209,758 |  |  |   | (28,747 | )
|                |  |                                 |          |      |  |      |         |  |  |   |         |  
|                |  | $                               | (54,783  | )    |  | $    | 402,628 |  |  | $ | 176,291 |  
|                |  |                                 |          |      |  |      |         |  |  |   |         |  

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10. Income Taxes

The operations of the Company and its affiliates are included for federal
income tax purposes in a consolidated federal income tax return filed by NTC.
For financial reporting purposes, the provision for income taxes is computed as
if the Company filed a separate federal income tax return utilizing the tax
rate applicable to NTC on a consolidated basis.

Deferred income taxes are determined on the asset and liability method in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. The asset and liability method requires the
recognition of deferred income taxes for the expected future tax consequences
of temporary differences between the carrying amounts on the financial
statements and the tax bases of assets and liabilities.

The primary components of deferred income taxes are as follows:

|                          |                                 |   |              |             |      |   |           |             |  
|------------------------- | ------------------------------- | - | ------------ | ----------- | ---- | - | --------- | ----------- | -
|                          |                                 |   | December 31,
|                          |                                 |   |             
|                          |                                 |   | 2001         |             | 2000
|                          |                                 |   |              |             |     
|                          |                                 |   | (restated)   |             |      |   |          
|DEFERRED TAX ASSETS:      |                                 |   |              |             |      |   |           |            
|                          | Net operating loss carryforward |   | $            | 23,800,000  |      |   | $         | 23,800,000  |  
|                          | Interest derivative             |   |              | 740,000     |      |   |           |            |  
|                          | Valuation allowance             |   |              | (21,840,000 | )    |   |           | (20,900,000 | )
|                          |                                 |   |              |             |      |   |           |            
|                          |                                 |   | 2,700,000    |             |      |   | 2,900,000 |            
|DEFERRED TAX LIABILITIES: |                                 |   |              |             |      |   |           |            
|                          | Property and equipment          |   |              | 2,700,000   |      |   |           | 2,900,000   |  
|                          |                                 |   |              |             |      |   |           |            
|                          |                                 | $ |             |             |      | $ |          |            
|                          |                                 |   |              |             |      |   |           |            

The federal income tax net operating loss carryforward of approximately
$70,000,000 expires from 2003 through 2020. Management believes that the
available objective evidence creates sufficient uncertainty regarding the
realization of the net deferred tax assets due to the recurring operating
losses being incurred by the Company. Accordingly, a valuation allowance has
been provided for the net deferred tax assets of the Company. The change in
the valuation allowance was $940,000, $4,820,000 and $4,078,000 for the years
ended December 31, 2001, 2000 and 1999, respectively.

The difference between the statutory tax rate and the tax benefit of zero
recorded by the Company is due to the Companys full valuation allowance
against its net deferred tax asset.

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11. Commitments and Contingencies

Lease Arrangements

The Company leases certain tower sites, office facilities and pole attachments
under leases accounted for as operating leases. Rental expense (including
month-to-month leases) was $894,665, $1,055,907 and $915,912 in 2001, 2000 and
1999, respectively. Minimum lease payments, excluding month-to-month leases,
to the end of the lease terms are as follows:

|                                                        |  |   |         | 
|------------------------------------------------------- |  | - | ------- | 
|2002 (including $22,800 to be paid to affiliates)       |  | $ | 86,705  | 
|2003 (including $21,600 to be paid to affiliates)       |  |   | 72,653  | 
|2004 (including $21,600 to be paid to affiliates)       |  |   | 70,241  | 
|2005 (including $21,600 to be paid to affiliates)       |  |   | 55,069  | 
|2006 (including $21,600 to be paid to affiliates        |  |   | 53,667  | 
|Thereafter (including $43,200 to be paid to affiliates) |  |   | 93,312  | 
|                                                        |  |   |         | 
|                                                        |  | $ | 431,647 | 
|                                                        |  |   |         | 

Effects of Regulation

The operation of a cable system is extensively regulated at the federal, local
and, in some instances, state levels. The Cable Communications Policy Act of
1984, the Cable Television Consumer Protection and Competition Act of 1992 (the
1992 Cable Act), and the 1996 Telecommunications Act (the 1996 Telecom Act,
and, collectively, the Cable Act) establish a national policy to guide the
development and regulation of cable television systems. The Federal
Communications Commission (FCC) has principal responsibility for implementing
the policies of the Cable Act. Many aspects of such regulation are currently
the subject of judicial proceedings and administrative or legislative
proposals. Legislation and regulations continue to change.

Cable Entry into Internet The U.S. Supreme Court recently ruled that cable
television systems may deliver high-speed Internet access and remain within the
protections of Section 703 of the Telecommunications Act of 1996 (the Pole
Attachment Act). National Cable & Telecommunications Assoc. v. Gulf Power
Co., Nos. 00-832 and 00-843, 534 U.S. (January 16, 2002). The Court reversed
the Eleventh Circuits decision to the contrary and sustained the FCC decision
that applied the Pole Attachment Acts rate formula and other regulatory
protections to cable television systems attachments over which commingled
cable television and cable modem services are provided.

Cable Rate Regulation Although the FCC established the rate regulatory scheme
pursuant to the 1992 Cable Act, local municipalities, commonly referred to as
local franchising authorities, are primarily responsible for administering the
regulation of the lowest level of cable service called the basic service tier.
The basic service tier typically contains local broadcast stations and public,
educational, and government access channels. Before a local franchising
authority begins basic service rate regulation, it must certify to the FCC that
it will follow applicable federal rules. Many local franchising authorities
have voluntarily declined to exercise their authority to regulate basic service
rates.

In a particular effort to ease the regulatory burden on small cable systems,
the FCC created special rate rules applicable for systems with fewer than
15,000 subscribers owned by an operator with fewer than 400,000 subscribers.
The special rate rules allow for a simplified cost-of-service showing for basic
service tier programming. All of Northlands systems are eligible for these
simplified cost-of-service rules, and have calculated rates in accordance with
those rules.

Electric Utility Entry into Telecommunications and Cable Television The 1996
Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services, including cable television,
notwithstanding the Public Utility Holding Company Act. Electric utilities
must establish separate subsidiaries, known as exempt telecommunications
companies and must apply to the FCC for operating authority. Like telephone
companies, electric utilities have substantial resources at their disposal, and
could be formidable competitors to traditional cable systems. Several of these
utilities have been granted broad authority to engage in activities that could
include the provision of video programming.

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Must Carry and Retransmission Consent The 1992 Cable Act contains broadcast
signal carriage requirements. Broadcast signal carriage is the transmission of
broadcast television signals over a cable system to cable customers. These
requirements, among other things, allow local commercial television broadcast
stations to elect once every three years between must carry status or
retransmission consent status. Less popular stations typically elect must
carry, which is the broadcast signal carriage rule that allows local commercial
television broadcast stations to require a cable system to carry the station.
Must carry requests can dilute the appeal of a cable systems programming
offerings because a cable system with limited channel capacity may be required
to forego carriage of popular channels in favor of less popular broadcast
stations electing must carry. More popular stations, such as those affiliated
with a national network, typically elect retransmission consent, which is the
broadcast signal carriage rule that allows local commercial television
broadcast stations to negotiate terms (such as mandating carriage of an
affiliated cable network or a digital broadcast signal) for granting permission
to the cable operator to carry the stations. Retransmission consent demands
may require substantial payments or other concessions.

Access Channels Local franchising authorities can include franchise
provisions requiring cable operators to set aside certain channels for public,
educational and governmental access programming. Federal law also requires
cable systems to designate a portion of their channel capacity, up to 15% in
some cases, for commercial leased access by unaffiliated third parties. The
FCC has adopted rules regulating the terms, conditions and maximum rates a
cable operator may charge for commercial leased access use.

Inside Wiring In an order issued in 1997, the FCC established rules that
require an incumbent cable operator upon expiration of a multiple dwelling unit
service contract to sell, abandon, or remove home run wiring that was
installed by the cable operator in a multiple dwelling unit building. These
inside wiring rules are expected to assist building owners in their attempts to
replace existing cable operators with new programming providers who are willing
to pay the building owner a fee, where this fee is permissible.

State and Local Regulation Cable television systems generally are operated
pursuant to nonexclusive franchises granted by a municipality or other state or
local government entity in order to cross public rights-of-way. Federal law
now prohibits local franchising authorities from granting exclusive franchises
or from unreasonably refusing to award additional or renew existing franchises.

Cable franchises generally are granted for fixed terms and in many cases
include monetary penalties for non-compliance and may be terminable if the
franchisee fails to comply with material provisions. The specific terms and
conditions of franchises vary materially among jurisdictions. Each franchise
generally contains provisions governing cable operations, service rates,
franchising fees, system construction and maintenance obligations, system
channel capacity, design and technical performance, customer service standards,
and indemnification protections. A number of states subject cable systems to
the jurisdiction of centralized state governmental agencies, some of which
impose regulation of a character similar to that of a public utility. Although
local franchising authorities have considerable discretion in establishing
franchise terms, there are certain federal limitations. For example, local
franchising authorities cannot insist on franchise fees exceeding 5% of the
systems gross cable-related revenues, cannot dictate the particular technology
used by the system, and cannot specify video programming other than identifying
broad categories of programming.

Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the local franchising authority may seek to impose new and more
onerous requirements, such as significant upgrades in facilities and service or
increased franchise fees as a condition of renewal. Historically, most
franchises have been renewed and transfer consents granted to cable operators
that have provided satisfactory services and have complied with the terms of
their franchise.

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12. Acquisition Of Systems And Disposition Of Assets

On March 31, 2000, the Company acquired the operating assets and franchise
rights to cable systems service approximately 1,600 basic subscribers in the
communities of Kingston and Hansville, Washington, located in Kitsap County,
from North Star Cable, Inc. The systems were acquired at a purchase price of
$3,100,000 adjusted at closing for the proration of certain revenues and
expenses. The acquisition was financed through borrowings under the Senior
Credit Facility.

The allocation of purchase price for the Kingston and Hansville Systems, as
shown in the following table, reflects the estimated fair value of assets and
liabilities acquired by the Company and may be adjusted upon final
determination of such fair value.

|                                       |  |   |           | 
|-------------------------------------- |  | - | --------- | 
|Franchises and other intangible assets |  | $ | 2,931,000 | 
|Property and equipment                 |  |   | 169,000   | 
|                                       |  |   |           | 
|                                       |  | $ | 3,100,000 | 
|                                       |  |   |           | 

On September 30, 2001 the Company acquired a cable system serving the areas in
and around Highlands, North Carolina, serving approximately 3,200 basic
subscribers, from an affiliated limited partnership managed by NCC. The system
was acquired at a purchase price of approximately $4,600,000 and was financed
with approximately $3,800,000 of cash on hand and an in-kind equity
contribution from the Companys parent of $798,850.

The allocation of purchase price for the Highlands System, as shown in the
following table, reflects the estimated fair value of assets and liabilities
acquired by the Company and may be adjusted upon final determination of such
fair value.

|                                       |  |   |           | 
|-------------------------------------- |  | - | --------- | 
|Franchises and other intangible assets |  | $ | 2,959,733 | 
|Property and equipment                 |  |   | 1,640,267 | 
|                                       |  |   |           | 
|                                       |  | $ | 4,600,000 | 
|                                       |  |   |           | 

On December 21, 2001, the Company sold its cable system serving the areas of
Bainbridge Island, Kingston and Hansville, Washington, which represented
approximately 6,450 basic subscribers, to TCI Cable Partners of St. Louis,
L.P. The systems were sold at a purchase price of approximately $19,800,000.
The Company recognized a gain of approximately $12,700,000 related to the
transaction.

Pro forma operating results of the Company for 2001 and 2000, assuming the
acquisitions and disposition described above had been made at the beginning of
2000, follow:

|                         |  |                     |             |      |  |   |             |  
|------------------------ |  | ------------------- | ----------- | ---- |  | - | ----------- | -
|                         |  | For the Years Ended
|                         |  | December 31,       
|                         |  |                    
|                         |  | 2001                |             | 2000
|                         |  |                     |             |     
|                         |  | (unaudited)        
|Service revenues         |  | $                   | 59,642,077  |      |  | $ | 58,655,144  |  
|                         |  |                     |             |      |  |   |             |  
|Net loss                 |  | $                   | (13,666,204 | )    |  | $ | (13,230,055 | )
|                         |  |                     |             |      |  |   |             |  
|Total comprehensive loss |  | $                   | (13,398,204 | )    |  | $ | (13,230,055 | )
|                         |  |                     |             |      |  |   |             |  

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SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

| |                                           |                     
| | ----------------------------------------- | --------------------
| | NORTHLAND CABLE TELEVISION, INC.         
|
| | By                                        | /s/ John S. Whetzell
| |                                          
| | John S. Whetzell, Chief Executive Officer

Date: 3/29/02

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.

|                                       |  |                                                                       |  |        
|-------------------------------------- |  | --------------------------------------------------------------------- |  | -------
|SIGNATURES                             |  | CAPACITIES                                                            |  | DATE   
|                                       |  |                                                                       |  |        
|                                      
|/s/ John S. Whetzell

John S. Whetzell |  | Director, Chairman of the Board and
Chief Executive Officer           |  | 11-8-02
|                                      
|/s/ Richard I. Clark

Richard I. Clark |  | Director, Executive Vice President, Treasurer
and Assistant Secretary |  | 11-8-02
|                                      
|/s/ Gary S. Jones                      |  | President                                                             |  | 11-8-02
|Gary S. Jones                          |  |                                                                       |  |        
|                                      
|/s/ John E. Iverson                    |  | Director and Secretary                                                |  | 11-8-02
|John E. Iverson                        |  |                                                                       |  |        

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CERTIFICATIONS

I, John Whetzell certify that:



|1. |  | I have reviewed this annual report on Form 10-K/A of Northland Cable
Television, Inc., and Subsidiary;                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report.                   

Date: November 8, 2002

| |  |                                         
| |  | ----------------------------------------
| |  | /s/ JOHN S. WHETZELL                    
| |  |                                         
| |  | John S. Whetzell
Chief Executive Officer

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I, Gary Jones certify that:



|1. |  | I have reviewed this annual report on Form 10-K/A of Northland Cable
Television, Inc., and Subsidiary;                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report.                   

Date: November 8, 2002

| |  |                                                                     
| |  | --------------------------------------------------------------------
| |  | /s/ GARY S. JONES                                                   
| |  |                                                                     
| |  | Gary S. Jones
President
(Principal Financial and Accounting
Officer)

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EXHIBITS INDEX

|        |  |                                                                                                                                                   |  |              |   | 
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | - | 
|        |  |                                                                                                                                                   |  | Sequentially
|Exhibit |  |                                                                                                                                                   |  | Numbered    
|Number  |  | Description                                                                                                                                       |  | Page        
|        |  |                                                                                                                                                   |  |             
|99.1    |  | Representation Letter                                                                                                                             |  |              | 1 | 
|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 |  |              | 2 | 
|99(b)   |  | Certification of President Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002               |  |              | 3 |