<PAGE>   1

               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

[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, 1999

[ ] 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             (I.R.S. Employer Identification No.)
 incorporation or organization)


                            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             (I.R.S. Employer Identification No.)
 incorporation or organization)


      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 [ ]
                       DOCUMENTS INCORPORATED BY REFERENCE
                      (Partially Incorporated into Part IV)

        (1) Form S-4 Registration Statement declared effective on February 12,
1998 (No. 333-43157). This filing contains ____ pages. Exhibits Index appears on
page _____. Financial Statements/Schedules Index appears on page _____.


<PAGE>   2


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

ITEM 1. BUSINESS

   Northland Cable Television, Inc. (the "Company"), a Washington Corporation,
was formed in October 1985 and owns and operates 40 cable television systems
serving small cities, towns, and rural communities in California, Georgia, South
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, 1999, 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.

        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. - 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.

        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. In many communities, the Company offers its
exclusive local news and information programming, produced by the Company's
wholly owned subsidiary, Northland Cable News, Inc. 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, 1999,
the total number of basic subscribers served by the Systems was 126,522, and the
Company's penetration rate (basic subscribers as a percentage of homes passed)
was approximately 64%.

        The Company has 90 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.

        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.


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<PAGE>   3

    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, 1999.

<TABLE>
<CAPTION>
                                                                                                              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)(6)
     ------          ---------     -----------    -----------    -----------   --------     -----------     ----------      ------
<S>                  <C>           <C>            <C>            <C>           <C>          <C>             <C>             <C>
So. Carolina
  /Georgia......      95,825        59,870           62.5%          47.3%       20,861          34.9%          $40.01        43.6%
Washington......      34,925        24,907           71.3%          19.7%        6,318          25.4%          $37.47        42.7%
Texas...........      47,950        29,167           60.8%          23.1%        8,300          28.5%          $35.91        46.1%
California......      19,090        12,578           65.9%           9.9%        4,294          34.1%          $34.93        42.5%
                     -------       -------           ----          -----        ------          ----           ------        ----
Total Systems...     197,790       126,522           64.0%         100.0%       39,773          31.4%          $38.05        44.0%
</TABLE>

----------

(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.

(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.

(6) EBITDA Margin for "Total Systems" includes Northland Cable News, Inc.'s net
    operating results.

        The South Carolina/Georgia Region. The South Carolina/Georgia Region
consists of ten headends serving 59,870 subscribers. Four headends, located in
Aiken, Greenwood and Clemson, South Carolina and Statesboro, Georgia, serve
53,577 subscribers or 89.5% of the total subscribers in the region. The region
is currently operated from four primary local offices located in Aiken,
Greenwood, Clemson and Statesboro.

        Clemson, South Carolina. The Clemson area systems serve 15,259
        subscribers from three headends, one of which is expected to be
        eliminated through interconnection. The Clemson system, which is home to
        Clemson University, is the largest system, serving 12,631 subscribers,
        and is in the final stages of a 400 MHz rebuild project. Approximately
        80% of the subscribers are served by plant with 400 MHz 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 is also planning to offer digital television service in the
        Clemson system by year-end 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 17,690 subscribers
        from three headends. The Aiken headend serves 89.2% of the subscribers,
        has a 550 MHz channel capacity and is addressable. 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.


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<PAGE>   4

        Greenwood, South Carolina. The Greenwood area systems serve 17,958
        subscribers from three headends. The Greenwood headend serves 90.2% of
        the subscribers and has a minimum of 400 MHz channel capacity. The
        Company plans to begin the upgrade of the Greenwood system to 550 MHz
        capacity in 2000. Although this system currently employs fiber optic
        technology, the Company has begun construction of the an expansion of
        the fiber optic backbone designed to support 870 MHz capacity.
        Additionally, a fiber optic backbone interconnect is being constructed
        to the Saluda and Edgefield systems. The Greenwood 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 Company owns all three of its headend sites.

        Statesboro, Georgia. The Statesboro system serves 8,963 subscribers from
        a single headend with approximately 90% of the subscribers served by 450
        MHz channel capacity. The first phase construction of a fiber backbone
        has begun with ability to deliver 870 MHz of bandwidth. The Statesboro
        system offers Northland Cable News, has a strong advertising sales
        effort and its office and headend site are owned by the Company.
        Statesboro, which is home to Georgia Southern University, has
        experienced steady population growth, with a compound annual growth rate
        for the period 1990 to 1995 of 2.4%, more than double the national
        average of 1.1%, in each case according to the U.S. Bureau of Census.

        The Washington Region. The Washington Region serves 24,907 subscribers
from five headends and is operated from three offices located in Port Angeles,
Bainbridge Island, and Moses Lake, Washington. The three largest headends serve
20,534 subscribers, or 82.4% of the Company's total subscribers in the region.

        Port Angeles, Washington. The Port Angeles system serves 8,312
        subscribers from one headend. The system utilizes a fiber optic backbone
        designed to support a 750 MHz capacity with all of the subscribers
        served by 330 MHz capacity plant. A 550 MHz upgrade is planned to begin
        in early 2001. The system provides Northland Cable News, which acts as a
        major news source for the area. 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.

        Bainbridge Island, Washington. The Bainbridge Island system serves 5,435
        subscribers from one headend. Although physically close to Seattle,
        hilly terrain makes for poor off-air reception in many areas of the
        island. The construction of a fiber optic backbone designed to support a
        750 MHz capacity is 80% accomplished, with completion expected by early
        2001. A 550 MHz upgrade is now 70% accomplished, with completion
        expected in year-end 2001. The system's combination office and headend
        site is owned. The system also launched high-speed internet service to
        its subscribers in the first quarter of 1999 and has achieved a
        penetration of 4% of subscribers.

        Moses Lake, Washington. The Moses Lake area systems serve 11,160
        subscribers from three headends. The Moses Lake headend serves 60.8% 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 launched a new product digital
        tier in the fourth quarter of 1999 that it believes will enhance the
        financial performance of that system. In addition to the 53 analog
        channels, 103 digital channels were added including, 17 basic, 14 pay,
        32 pay-per-view, and 40 audio. 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 is in
        progress. The Ephrata system is intended to be upgraded to 450 MHz
        capacity by year-end 2001. The Moses Lake area, located in central
        Washington State, has experienced a compound annual growth rate of its
        population for the period 1990 through 1995 of 3.3%, well above the
        national average.

        The Texas Region. The Texas Region is characterized by smaller systems,
with 18 headends serving 29,167 subscribers. Two of the region's headends are
scheduled to be interconnected by year-end 2000. Seven headends currently serve
69.3% 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 7,218
        subscribers from a cluster of four headends. Stephenville is home to
        Tarleton State College, an affiliate of Texas A&M University.
        Approximately 94.4% of the subscribers currently are served by plant
        with 400 MHz or better capacity. The systems have experienced steady
        growth in their tier subscriptions. The office and three of the headend
        sites are owned by the Company.

    Mexia, Texas. The Mexia area systems serve 8,484 subscribers from a cluster
    of seven headends, with the two largest headends, Mexia and
    Fairfield/Teague, serving 70.4% of the subscribers. Approximately 87.1% of
    subscribers currently are


                                       4
<PAGE>   5

        serviced by plant with 400 MHz capacity, with the Mexia headend
        utilizing a fiber optic backbone. The Mexia area has a diversified
        economy with Nucor Steel, Inc. as a major employer.

        Marble Falls, Texas. The Marble Falls area systems serve 8,136
        subscribers from a cluster of five headends. In February 1999 the
        Company completed a fiber optic interconnect of the Kingsland system to
        the Marble Falls system, thereby eliminating an additional headend. With
        the completion of the Kingsland interconnect, approximately 64.9% of the
        subscribers in the area are served from a single headend. Currently
        under construction is a fiber backbone interconnect to tie the Burnet
        system to the Marble Falls system. This will eliminate an additional
        headend and increase the percentage of area subscribers served by the
        Marble Falls system to approximately 78.6%. The combination office and
        headend site in Marble Falls is owned by the Company. The Burnet system
        is currently at 450 MHz capacity and over the next three to five years
        the remaining systems in the Marble Falls area are scheduled to be
        upgraded to 400 MHz or 550 MHz capacity. The Marble Falls region is a
        popular outdoor recreation and retirement area for families from nearby
        Austin and San Antonio. The population growth rate in the area is 3.7%,
        in excess of three times the national average.

        The remaining three headends in the Texas region serve 5,329
        subscribers, with all of the subscribers served by plant with 330 MHz
        capacity or better.

        The California Region. The California Region serves 12,578 subscribers
from seven headends, which are operated from three offices located in Yreka,
Oakhurst and Mount Shasta, California. Three headends serve 10,886 subscribers
or 86.5% 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
        4,695 subscribers from a cluster of five headends. The Oakhurst headend
        serves 64.0% of the subscribers in the area. An upgrade of the Oakhurst
        system to 450 MHz capacity is in process, and 90.0% of Oakhurst system's
        subscribers are served by 450 MHz capacity plant. The entire Oakhurst
        system upgrade will be completed by 2002. The current upgrade plan
        includes the construction of a fiber optic backbone, with the
        interconnect and subsequent elimination of one headend.

        Yreka, California. The Yreka, California system, located near Mt. Shasta
        National Park, serves 3,311 subscribers from a single headend. Yreka is
        the county seat of Siskiyou County. The Yreka system currently has 330
        MHz capacity. An upgrade of the system to 450 MHz capacity is now
        approximately 28% complete with completion projected by year-end 2001.
        The Yreka office and headend sites are owned by the Company.

        Mount Shasta, California. The Mount Shasta, California system, serves
        4,572 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 450 MHz. The completion of an
        upgrade to 450 MHz is planned in 2001. The Mount Shasta area has a
        strong economic base. Forestry, forest services and tourism are the
        major industries. Annual population growth from 1990 through 1997
        averaged 2.3% in the area.

        As of December 31, 1999, the Company had approximately 214 full-time
employees and 6 part-time employees. Fourteen 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 three
categories: basic subscribers, tier subscribers and premium 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. "Tier 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


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"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.

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 his 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 licenses 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.

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
telephone companies as direct competitors, however, is likely to continue over
the next several years and could adversely affect the profitability and market
value of the Company's 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 10 million customers nationwide. Companies offering direct broadcast
satellite service use video compression technology to increase channel capacity
of their systems to more than 100 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 same legislation reduced the compulsory copyright fees paid by DBS companies
and allowed them to continue offering distant network signals to rural
customers. In addition to emerging high-powered DBS competition, cable
television systems face competition from several low-powered providers, whose
service requires use of much larger home satellite dishes. The availability of
DBS equipment at reasonable prices, and the relative attractiveness of the
programming options offered by the cable television industry and direct
broadcast


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<PAGE>   7

satellite competitors will impact the ability of providers of DBS service
providers to compete successfully with 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.

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 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


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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, 1999, approximately 13% 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 1996 Telecom Act, however, provides special rate relief for small
cable operators. For franchising units with less than 50,000 subscribers and
owned by an operator with less than one percent of the nation's cable
subscribers (i.e., approximately 600,000 subscribers) that is not affiliated
with any entities with aggregate annual gross revenue exceeding $250 million,
cable programming service tier rate regulation was automatically eliminated. All
of the Company's systems qualify for this cable programming service tier
deregulation. The elimination of cable programming service tier regulation,
which is the rate regulation of a particular level of packaged programming
services, typically referring to the expanded basic level of services, in a
prospective basis affords the Company substantially greater pricing flexibility.

        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 but two of the Company's
systems are eligible for these simplified cost-of-service rules, 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 2002.

        Regulation by the FCC of cable programming service tier rates for all
systems, regardless of size, became 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 the
Company 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

                                   8
<PAGE>   9

telecommunications service, as well as cable service, over its plant. The FCC
recently clarified that a cable operator's favorable pole rates are not
endangered by the provision of Internet access.

        Cable entry into telecommunications will be affected by the regulatory
landscape now being developed by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers, including cable operators, is the interconnection
obligation imposed on all telecommunications carriers. In July 1997, the Eighth
Circuit Court of Appeals vacated certain aspects of the FCC's initial
interconnection order. However, most of that decision was reversed by the U.S.
Supreme Court in January 1999. The Supreme Court effectively upheld most of the
FCC interconnection regulations. Although these regulations should enable new
telecommunications entrants to reach viable interconnection agreements with
incumbent carriers, many issues, including which specific network elements the
FCC can mandate that incumbent carriers make available to competitors, remain
subject to administrative and judicial appeal. If the FCC's current list of
unbundled network elements is upheld on appeal, it could facilitate the
provision of telecommunications services by new entrants, including the Company.

INTERNET SERVICE

        There is at present no significant federal regulation of cable system
delivery of Internet services. Furthermore, the FCC recently issued several
reports finding no immediate need to impose this type of regulation. However,
this situation may change as cable systems expand their broadband delivery of
Internet services. In particular, proposals have been advanced at the FCC and
Congress that would require cable operators to provide access to unaffiliated
Internet service providers and online service providers. Certain Internet
service providers also are attempting to use existing commercial leased access
rules (originally designed for video programming) to gain access to cable system
delivery. A petition on this issue is now pending before the FCC. Finally, some
local franchising authorities are considering the imposition of mandatory
Internet access requirements as part of cable franchise renewals or transfers. A
federal district court in Portland, Oregon recently upheld the legal ability of
local franchising authority to impose these type of conditions, but an appeal
was filed with the Ninth Circuit Court of Appeals, oral argument has been held,
and the parties are awaiting a decision. Other local authorities have imposed or
may impose mandatory Internet access requirements on cable operators. These
developments could, if they become widespread, burden the capacity of cable
systems and complicate any plans the Company may have or develop for providing
Internet service.

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 recently 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


                                       9
<PAGE>   10

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. 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.

        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 has been stayed pending further
judicial review and FCC rulemaking.

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. 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, such as market conditions, the introduction of
digital broadcasts, channel capacity and similar matters when these arrangements
are renegotiated. As of the date of this filing, retransmission consent
agreements are pending with certain broadcasters affecting systems serving
approximately 56,000 basic subscribers. Although the Company expects to reach
agreement with the broadcasters, no assurances can be given that such agreements
can be obtained or that they will not result in increased operating costs to the
Company.

        The burden associated with must carry may increase substantially if
broadcasters proceed with planned 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. A rulemaking
is now pending at the FCC regarding the imposition of dual digital and analog
must carry.

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. The Company believes that requests for
commercial leased access carriages have been relatively limited. A new request
has been forwarded to the FCC, however, requesting that unaffiliated Internet
service providers be found eligible for commercial leased access. Although the
Company does not believe this use is in accord with the governing statute, a
contrary ruling could lead to substantial leased activity by Internet service
providers and disrupt the Company's plans for Internet service.


                                       10
<PAGE>   11

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. 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.

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 the
Company 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 the Company 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,


                                       11
<PAGE>   12

        - 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,

        - 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 the two principal major music
performing rights organizations, the American Society of Composers, Authors and
Publishers (ASCAP) and BroadcastMusic, Inc. (BMI). The cable industry has had a
long series of negotiations and adjudications with both organizations. A prior
voluntarily negotiated settlement with BMI has now expired, and is subject to
further proceedings. The governing rate court recently set retroactive and
prospective cable industry rates for ASCAP music based on the previously
negotiated BMI rate. Although the Company cannot predict the ultimate outcome of
these industry proceedings or the amount of any license fees that they may be
required to pay for past and future use of association-controlled music, the
Company does not believe these license fees will be significant to their
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, 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


                                       12
<PAGE>   13

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.

        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; Bainbridge
Island, Moses Lake and Port Angeles, Washington; Clemson, Aiken and Greenwood,
South 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.


                                       13
<PAGE>   14

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.


                                       14
<PAGE>   15

                                     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, 1999.

   (c) During 1999, the Company did not pay cash dividends and has no
intentions of paying cash dividends in the foreseeable future.


ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                              ----------------------------------------------------------------------------------------
                                  1999               1998                1997              1996               1995
                              ------------       ------------       ------------       ------------       ------------
<S>                           <C>                <C>                <C>                <C>                <C>
  SUMMARY OF OPERATIONS:

Revenue                       $ 58,848,415       $ 56,002,667       $ 39,517,808       $ 33,180,477       $ 26,997,661

Operating income                 6,561,172          4,655,761          4,588,563          4,373,211          3,403,048

Net loss                       (11,776,281)        (7,758,291)        (5,550,635)        (4,229,028)        (3,758,117)

</TABLE>

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                              ----------------------------------------------------------------------------------------
                                  1999               1998                1997              1996               1995
                              ------------       ------------       ------------       ------------       ------------
<S>                           <C>                <C>                <C>                <C>                <C>
  BALANCE SHEET DATA:
Total assets                  $141,985,167       $156,586,254       $ 92,421,978       $ 91,599,263       $ 75,754,590

Notes payable                  175,090,000        177,340,000        107,962,513        102,154,732         83,144,911

Total liabilities              183,741,171        186,565,977        114,643,410        117,608,253         97,534,552

Shareholder's  deficit         (41,756,004)       (29,979,723)       (22,221,432)       (26,008,990)       (21,779,962)
</TABLE>


        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 (the "South
Carolina Acquisitions"). See "ACQUISITION OF SYSTEMS AND DISPOSITION OF ASSETS."


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

RESULTS OF OPERATIONS

1999 AND 1998

        Basic subscribers decreased 2,425 or 1.9%, from 128,947 to 126,522 for
the year ended December 31, 1999.

        Revenues increased $2.8 million or 5.0%, from $56.0 million to $58.8
million in 1999. This increase was primarily attributable to the Mount Shasta
acquisition, which accounted for approximately $1.9 million of the 1999 revenue
increase. Average monthly revenue per basic subscriber increased $1.65 or 4.5%,
from $36.81 to $38.46 for the year ended December 31, 1999. Such increase was
attributable to: (i) rate increases implemented in a majority of the Company's
systems during the year; and (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 $1.31 or 4.9%, from $26.53 to $27.84 for the
year ended December 31, 1999. On a pro forma basis, adjusting for 1998
acquisitions and dispositions: (i) revenues would have increased $1.7 million or
3.0%, from $57.1 million to $58.8 million; and (ii) revenue per average basic
subscriber would have increased $1.81 or 4.9%, from $36.65 to $38.46.

        Operating expenses, which include costs related to programming,
technical personnel, repairs and maintenance and advertising sales, increased
approximately $700,000 or 3.8%, from $18.6 million to $19.3 million for the year
ended December


                                       15
<PAGE>   16

31, 1999. Operating expenses as a percentage of revenues decreased from 33.2% to
32.8% for the year ended December 31, 1999. The December 1998 acquisition of the
Mount Shasta system increased operating expenses approximately $700,000. On a
pro forma basis, operating expenses would have increased approximately $300,000
or 1.6%, from $19.0 million to $19.3 million for the year ended December 31,
1999. Such increase would have been attributable to: (i) annual wage and benefit
increases; and (ii) higher programming costs resulting from rate increases by
certain programming vendors and the launch of new programming services in
various systems.

        General and administrative expenses, which include on-site office and
customer service personnel costs, customer billing, postage and marketing
expenses and franchise fees increased approximately $500,000 or 4.9%, from $10.2
million to $10.7 million for the year ended December 31, 1999. The acquisition
of the Mount Shasta system increased general and administrative expenses
approximately $400,000. On a pro forma basis, general and administrative
expenses would have increased approximately $200,000 or 1.9%, from $10.5 million
to $10.7 million for the year ended December 31, 1999. Such increase is due to:
(i) annual wage and benefit increases; and (ii) increases in revenue-based
expenses such as franchise fees.

        Management fees increased $100,000 or 3.6%, from $2.8 million to $2.9
million for the year ended December 31, 1999. 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 decreased approximately $500,000
or 2.5%, from $19.8 million to $19.3 million for the year ended December 31,
1999. Such decrease was the result of certain assets becoming fully depreciated
offset by depreciation and amortization of recent purchases of plant and
equipment.

        Interest expense increased approximately $200,000 or 1.1%, from $17.6
million to $17.8 million for the year ended December 31, 1999. The Company's
weighted average outstanding indebtedness increased from approximately $171.7
million in 1998 to $176.5 million in 1999. In addition, the Company's weighted
average interest rate decreased from approximately 9.58% in 1998 to 9.46% in
1999.

1998 AND 1997

        Basic subscribers increased 35,272 or 37.7%, from 93,675 to 128,947 for
the year ended December 31, 1998.

        Revenues increased $16.5 million or 41.8%, from $39.5 million to $56.0
million in 1998. This increase was primarily attributable to the South Carolina
Acquisitions, which accounted for approximately $15.7 million of the 1998
revenue increase. Average monthly revenue per basic subscriber increased $1.20
or 3.4%, from $35.61 to $36.81 for the year ended December 31, 1998. Such
increase was attributable to: (i) rate increases implemented in a majority of
the Company's systems during the year; and (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 $1.81 or 7.3%, from $24.72 to
$26.53 for the year ended December 31, 1998. Excluding the impact of the system
acquisitions and dispositions in 1997 and 1998: (i) revenues would have
increased $1.2 million or 3.1%, from $38.2 million to $39.4 million; and (ii)
revenue per average basic subscriber would have increased $1.31 or 3.7%, from
$35.67 to $36.98.

        Operating expenses, which include costs related to programming,
technical personnel, repairs and maintenance and advertising sales, increased
$5.7 million or 44.2%, from $12.9 million to $18.6 million for the year ended
December 31, 1998. Operating expenses as a percentage of revenues increased from
32.7% to 33.2% for the year ended December 31, 1998. A substantial portion of
these increases was due to the South Carolina Acquisitions, which increased
operating expenses $5.2 million or 40.3%. Excluding the impact of the system
acquisitions and dispositions in 1997 and 1998, operating expenses would have
increased approximately $600,000 or 4.9%, from $12.3 million to $12.9 million
for the year ended December 31, 1998. Such increase would have been attributable
to: (i) annual wage and benefit increases; and (ii) higher programming costs
resulting from rate increases by certain programming vendors and the launch of
new programming services in various systems.

        General and administrative expenses, which include on-site office and
customer service personnel costs, customer billing, postage and marketing
expenses and franchise fees increased approximately $2.9 million or 39.7%, from
$7.3 million to $10.2 million for the year ended December 31, 1998. This
increase was attributable primarily to the South Carolina Acquisitions, which
increased general and administrative expenses approximately $3.2 million or
43.8%. Excluding the impact of the system acquisitions and dispositions in 1997
and 1998, general and administrative expenses would have decreased approximately
$100,000 or 1.4%, from $6.9 million to $6.8 million for the year ended December
31, 1998. Such decrease is due to a one-time


                                       16
<PAGE>   17

adjustment to copyright fees and property insurance off-set by: (i) annual wage
and benefit increases; and (ii) increases in revenue-based expenses such as
franchise fees.

        Management fees increased $900,000 or 47.4%, from $1.9 million to $2.8
million for the year ended December 31, 1998. 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 $7.0 million or 54.7%,
from $12.8 million to $19.8 million for the year ended December 31, 1998. Such
increase was due to the South Carolina Acquisitions and the Company's capital
expenditures.

        Interest expense increased by $7.4 million or 72.5%, from $10.2 million
to $17.6 million for the year ended December 31, 1998. Such increase was
primarily attributable to increased borrowings incurred in connection with the
South Carolina Acquisitions. The Company's average outstanding indebtedness
increased $72.1 million or 68.9%, from $104.6 million to $176.7 million for the
year ended December 31, 1998.


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, 1997 and 1998 and
1999, the Company's net cash provided from operations was $9.1 million, $9.6
million, $8.1 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, 2000 are
expected to be $20.0 million. The Company anticipates that cash flow from
operations will be sufficient to service its debt through December 31, 2000. The
Company's debt service obligations for the year ended December 31, 2001 are
anticipated to be $24.2 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 $8.1 million for the year
ended December 31, 1999. Adjustments to the $11.8 million net loss for the
period to reconcile to net cash provided by operating activities consisted
primarily of $20.3 million of depreciation and amortization.

        Net cash used in investing activities was $7.2 million for the year
ended December 31, 1999, and consist primarily of $7.1 million in capital
expenditures.

        Net cash used in financing activities was $2.4 million for the year
ended December 31, 1999. The Company made $2.3 million of principal payments on
notes payable.

        EBITDA increased approximately $1.5 million or 6.1%, from $24.4 million
to $25.9 million for the year ended December 31, 1999. EBITDA Margin increased
from 43.6% to 44.0% for the year ended December 31, 1999. These changes were
attributable primarily to the aforementioned increases in revenues. 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.

        Net cash provided by operating activities was $9.6 million for the year
ended December 31, 1998. Adjustments to the $7.8 million net loss for the period
to reconcile to net cash provided by operating activities consisted primarily of
$20.7 million of depreciation and amortization, off-set by the $5.1 million gain
on disposal of assets primarily due to the disposition of the Woodburn, Oregon
system and other changes in operating balance sheet accounts.

        Net cash used in investing activities was $77.2 million for the year
ended December 31, 1998, and consist primarily of $77.7 million for the South
Carolina Acquisitions and the Mount Shasta, California acquisition, capital
expenditures of $6.3 million off-set by $7.1 million in proceeds primarily from
the Woodburn, Oregon disposition.


                                       17
<PAGE>   18

        Net cash provided by financing activities was $69.1 million for the year
ended December 31, 1998. The Company had $78 million in additions to long term
debt and made $8.6 million of principal payments on notes payable.

        EBITDA increased approximately $7 million or 40.2%, from $17.4 million
to $24.4 million for the year ended December 31, 1998. EBITDA Margin decreased
from 44.1% to 43.6% for the year ended December 31, 1998. These changes were
attributable primarily to the South Carolina Acquisitions, which contributed
approximately $6.5 million of EBITDA for the year ended December 31, 1998. The
EBITDA Margin for the South Carolina Acquisitions was 41.4% for the year ended
December 31, 1998. Excluding the impact of the system acquisitions and
dispositions in 1997 and 1998, EBITDA would have increased $600,000 or 3.5%,
from $17.1 million to $17.7 million and EBITDA Margin would have increased from
44.8% to 44.9% for the year ended December 31, 1998.

        Net cash provided by operating activities was $9.1 million for the year
ended December 31, 1997. Adjustments to the $5.6 million net loss for the period
to reconcile to net cash provided by operating activities consisted primarily of
$12.8 million of depreciation and amortization, off-set by other changes in
operating balance sheet accounts.

        Net cash used in investing activities was $11.1 million for the year
ended December 31, 1997, and consist primarily of $6.5 million for the
acquisition of cable television systems in and around the communities of Marlin,
Madisonville and Buffalo, Texas, and capital expenditures of $4.0 million.

        Net cash provided by financing activities was approximately $800,000 for
the year ended December 31, 1997. The Company had $105 million in additions to
long term debt and made $99.2 million of principal payments on notes payable.

        EBITDA increased approximately $2.3 million or 15.2%, from $15.1 million
to $17.4 million for the year ended December 31, 1997. EBITDA Margin decreased
from 45.5% to 44.1% for the year ended December 31, 1997. These changes were
attributable primarily to the Moses Lake Acquisition, which contributed
approximately $1.7 million of EBITDA for the year ended December 31, 1997. The
EBITDA Margin for the Moses Lake area systems was 37.3% for the year ended
December 31, 1997. Excluding the effects of the Moses Lake Acquisition, EBITDA
would have increased $900,000 or 6.0%, from $15.1 million to $16.0 million for
the year ended December 31, 1997.


        Effective June 30, 1997, the Company received a non-cash capital
contribution of approximately $9.3 million which replaced, in its entirety, the
then outstanding net unsecured advances that had previously been owed to NTC and
other affiliates of the Company other than amounts due for normal operations,
management fees paid to NCC and for services provided by affiliated entities as
discussed above.

        In November, 1997 the Company completed the issuance of $100 million of
senior subordinated notes (the "Offering") and amended its revolving credit and
term loan agreement to provide for $100 million of senior secured bank debt (the
"Senior Credit Facility"). The following is a brief summary of each transaction.

        The Offering: 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 cash ratio of 6.75 to 1. As of December 31, 1999, the Company was in
compliance with the terms of the Notes.

        The Senior Credit Facility: In 1998 the Company amended and restated its
Senior Credit Facility. The Senior Credit Facility, as amended, establishes an
eight-year reducing revolving loan facility in the initial aggregate principal
amount of $25.0 million (the "Reducing Revolving Facility") and an eight-year
term loan in the aggregate principal amount of $75.0 million (the "Term Loan").
As of December 31, 1999 proceeds from borrowings under the Senior Credit
Facility were utilized in financing the acquisition of certain cable television
systems as discussed below. Amounts available under the Reducing Revolving
Facility will be for working capital purposes and other permitted uses as
described in the Senior Credit Facility. As of December 31, 1999, $14,673,500
was available to borrow by the Company under its Reducing Revolving Facility.


                                       18
<PAGE>   19

        At the Company's election, the interest rate per annum applicable to the
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 3.00% for LIBOR loans and from 0.00% to
1.75% for Base Rate loans.

        The 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 1.25 to 1.00 initially, increasing
over time to 2.25 to 1.00; (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 December 31,
1997; (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 1.20 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, decreasing over time to 3.75 to 1.00. 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, 1999, the outstanding balance under the Senior Credit
Facility was $75,090,000. As of the date of this filing, interest rates on the
Senior Credit Facility were as follows: $61,750,000 fixed at 8.53% under the
terms of a self-amortizing interest rate swap agreement with the Company's
lender expiring December 31, 2000; $7,000,000 fixed at 7.73% under the terms of
a interest rate swap agreement with the Company's lender expiring December 4,
2000; $3,500,000 at a LIBOR based rate of 8.94% expiring March 31, 2000;
$2,764,000 at a LIBOR based rate of 8.88% expiring June 5, 2000. The balance of
$76,000 bears interest at the prime rate plus 1.50% (currently 10.00%). 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. Gains or losses
associated with changes in fair values of these swaps and the underlying
notional principal amounts are deferred and recognized against interest expense
over the term of the agreements in the consolidated statements of operations.

        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. The use of derivatives does not
have a significant effect on the Company's result of operations or its financial
position.

<TABLE>
<CAPTION>
                                                                   Expected Maturity Date
                           ------------------------------------------------------------------------------------------------------
                              2000           2001           2002           2003          2004         Thereafter         Total
                           ----------     ----------     ----------     ----------     ----------     -----------     -----------
<S>                        <C>            <C>            <C>            <C>            <C>            <C>             <C>
Liabilities
Debt Maturity               3,000,000      7,000,000     11,000,000     14,750,000     18,000,000     121,340,000     175,090,000
Debt Interest Payments     16,473,691     15,999,191     15,145,091     13,923,254     12,369,266      31,002,583     104,913,076
Average Interest Rate            9.49%          9.49%          9.49%          9.49%          9.49%           9.49%           9.49%

Interest Rate Swaps
  Variable to Fixed
  Notional Amount          58,750,000             --             --             --             --              --      58,750,000
  Average Pay Rate*              5.78%            --             --             --             --              --            5.78%
  Average Receive Rate*          5.28%            --             --             --             --              --            5.28%

  Notional Amount           7,000,000             --             --             --             --              --       7,000,000
  Average Pay Rate*              4.98%            --             --             --             --              --            4.98%
  Average Receive Rate*          5.23%            --             --             --             --              --            5.23%
</TABLE>


                                       19
<PAGE>   20

*plus an applicable margin, currently 2.75%

It is the Company's policy to renegotiate swap agreements on or near expiration.

ACQUISITION OF SYSTEMS AND DISPOSITION OF ASSETS

        On January 2, 1998, the Company acquired substantially all of the
operating assets and franchise rights of cable television systems serving
approximately 35,700 basic subscribers in or around the communities of Aiken,
Greenwood, Saluda, Ware Shoals, McCormick and Edgefield, all in the state of
South Carolina from Intermedia Partners of Carolina, and Robin Cable Systems
L.P. The systems were acquired at a purchase price of $69,975,000 adjusted at
closing for the proration of certain revenues and expenses. The Acquisition was
financed through borrowings under the senior credit facility.

        On May 15, 1998 the Company sold all of its cable operations in the
state of Oregon (the "Woodburn System") to North Willamette Telecom, Inc. The
net proceeds from the sale of the system were approximately $6,874,000, of which
$6,424,000 was utilized to reduce amounts outstanding under the Senior Credit
Facility. The Woodburn System served approximately 4,300 basic subscribers.

        On December 1, 1998, the Company acquired the operating assets and
franchise rights to cable systems serving approximately 5,100 basic subscribers
in the communities of Mt. Shasta, McCloud, Weed, and Dunsmuir, California,
located in Shasta and Siskiyou Counties (the "Mt. Shasta System") from MediaOne
Group, Inc. The systems were acquired at a purchase price of $7,605,000 adjusted
at closing for the proration of certain revenues and expenses. The acquisition
was financed through borrowings under the Senior Credit Facility.

CAPITAL EXPENDITURES

        For the year ended December 31, 1999, the Company had capital
expenditures of $7.1 million. Capital expenditures included: (i) expansion and
improvements of cable properties including a new product digital launch; (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 $10.5 million and $8.9 million in
capital expenditures for 2000 and 2001, respectively . 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. To fund
planned 2000 capital expenditures the Company plans to utilize approximately
$6.8 million of cash flow from operations, borrow approximately $2.5 million
from it's Senior Credit Facility and defer approximately $1.2 million in
management fees payable to its parent.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The audited financial statements of the Company for the years ended
December 31, 1999, 1998 and 1997 are included as a part of this filing (see Item
14(a)(1) below).


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

        None.


                                       20
<PAGE>   21

                                    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.

<TABLE>
<CAPTION>
      NAME                        AGE                 POSITION
      ----                        ---                 --------
<S>                               <C>    <C>
John S. Whetzell............      58     Director, Chairman of the Board and President
Richard I. Clark............      42     Director, Vice President, Treasurer and Assistant Secretary
James A. Penney.............      45     Vice President and Secretary
Gary S. Jones...............      42     Vice President and Chief Financial Officer
Richard J. Dyste............      54     Vice President, Technical Services
R. Gregory Ferrer...........      44     Vice President and Assistant Treasurer
James E. Hanlon.............      66     Divisional Vice President
H. Lee Johnson..............      56     Divisional Vice President
John E. Iverson.............      63     Director and Assistant Secretary
</TABLE>


        John S. Whetzell. Mr. Whetzell has been President, Chairman of the Board
and a director of the Company since its inception in 1985. He also serves as
President, Chairman of the Board and a director of Northland Telecommunications
Corporation, Northland Communications Corporation (which is the general partner
of each of the Company's four affiliated limited partnerships), Northland Cable
Services Corporation ("NCSC"), Cable Ad-Concepts, Inc., Northland Cable News,
Inc., Northland Cable Properties, Inc. (NCPI), Northland Cable Ventures LLC
(NCV), Northland Media, Inc. ("NMI"), Statesboro Media, Inc., ("SMI") and
Corisicana Media, Inc. ("CMI"), (collectively, the "Northland Affiliates"). He
has been involved with the cable television industry for over 25 years. Between
1979 and 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 FCC from 1974 to 1979. He provided economic studies which support the
deregulation of cable television both in federal and state arenas. Mr. Whetzell
also 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.

        Richard I. Clark. Mr. Clark has served as Vice President and Treasurer
of the Company since 1985, as Assistant Secretary since 1987 and as a director
since 1985. Mr. Clark also serves as Vice President, Treasurer, Assistant
Secretary and a director of each of the Northland Affiliates. Mr. Clark was an
original incorporator of Northland Telecommunications Corporation and is
responsible for the administration and investor relations activities of
Northland Telecommunications Corporation, including financial planning and
corporate development. 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 has prepared documents for major
cable television companies in franchising and budgeting projects through the
application of these programs. From 1979 to 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 21 years. In
1979, Mr. Clark graduated cum laude from Pacific Lutheran University with a
Bachelor of Arts degree in accounting.

        James A. Penney. Mr. Penney has served as Vice President and General
Counsel of the Company since 1985, and as Secretary since 1987. Mr. Penney also
serves as Vice President, General Counsel and Secretary of each of the Northland
Affiliates. Mr. Penney is responsible for advising all Northland systems with
regard to legal and regulatory matters, and also is involved in the acquisition
and financing of new cable systems. From 1983 until 1985 he was associated with
the law firm of Ryan, Swanson & Cleveland P.L.L.C. Mr. Penney holds a Bachelor
of Arts degree from the University of Florida and a Juris Doctor from The
College of William and Mary, where he was a member of The William and Mary Law
Review.

        Gary S. Jones. Mr. Jones serves as Chief Financial Officer and has been
Vice President of the Company since 1986. He also serves as Vice President and
Chief Financial Officer of each of the Northland Affiliates. Mr. Jones is
responsible for cash management, financial reporting and banking relations for
the Company and each of the Northland Affiliates, and is involved in


                                       21
<PAGE>   22

the acquisition and financing of new cable systems. Prior to joining the
Company, 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. Mr. Dyste has been Vice President -- Technical
Services of the Company since 1988. Mr. Dyste also serves as Vice President --
Technical Services of each of the Northland Affiliates other than NCSC. Mr.
Dyste joined the Company in 1986, originally as an engineer and operations
consultant. From 1977 to 1985, Mr. Dyste owned and operated Bainbridge TV Cable,
which owned the Bainbridge Island, Washington system now owned by the Company.
Mr. Dyste is a past President and a current member of the Mount Rainier Chapter
of the Society of Cable Television Engineers, Inc. He is a graduate of
Washington Technology Institute.

        R. Gregory Ferrer. Mr. Ferrer has served as Vice President of the
Company since 1998. Mr. Ferrer joined the Company in 1984 as Assistant
Controller and was promoted to Assistant Treasurer in 1986. Mr. Ferrer is
responsible for coordinating all of the Company's property tax filings,
insurance requirements and system programming contracts as well as interest rate
management and other treasury functions. Prior to joining the Company, Mr.
Ferrer was a Certified Public Accountant at Benson & McLaughlin, a local
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.

        James E. Hanlon. Mr. Hanlon has served as Divisional Vice President of
the Company since 1985. Mr. Hanlon also serves as Divisional Vice President of
each of the Northland Affiliates other than NCSC, NMI and CMI. Prior to his
association with the Company, he served as Chief Executive of M.C.T.
Communications from 1981 to 1985. His responsibilities included supervision of
the franchise, construction and operation of a cable television system located
near Tyler, Texas. From 1979 to 1981, Mr. Hanlon was President of the CATV
Division of Buford Television, Inc., and from 1973 to 1979, he served as
President and General Manager of Suffolk Cablevision in Suffolk County, New
York. Mr. Hanlon has also served as Vice President and Corporate Controller of
Viacom International, Inc. and Division Controller of New York Yankees, Inc. Mr.
Hanlon has a Bachelor of Science degree in Business Administration from St.
Johns University.

        H. Lee Johnson. Mr. Johnson has been Divisional Vice President of the
Company since 1994. Mr. Johnson also serves as Divisional Vice President of each
of the Northland Affiliates other than NCPI, NCSC, NMI and CMI. Mr. Johnson
served as Regional Manager for several systems of the Company and its affiliates
from 1986 to 1994 until his promotion to Divisional Vice President. Prior to his
association with the Company, Mr. Johnson 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, which owned the Statesboro,
Georgia system now owned by the Company. Mr. Johnson has been involved in the
cable television industry for over 31 years and is a current member of the
Society of Cable Television Engineers. He is a graduate of Swainsboro Technical
Institute.

        John E. Iverson. Mr. Iverson has served as Assistant Secretary and a
director of the Company since 1985. He also serves as Assistant Secretary and a
director of each of the Northland Affiliates. Mr. Iverson is currently a member
of 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 37 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.

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.


                                       22
<PAGE>   23

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        (a) CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Security ownership of
management as of December 31, 1999 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.

<TABLE>
<CAPTION>
                                                               NUMBER OF                PERCENTAGE OF
                                                          SHARES BENEFICIALLY        SHARES BENEFICIALLY
BENEFICIAL OWNER                                                 OWNED                      OWNED
----------------                                          -------------------        -------------------
<S>                                                       <C>                          <C>
John S. Whetzell..................................            1,009,661                    22.6%
Adele P. Butler...................................              530,000                    11.9%
Pamela B. McCabe..................................              510,144                    11.4%
Robert M. Arnold..................................              384,000                     8.6%
Richard I. Clark..................................              309,661                     6.9%
Robert A. Mandich.................................              278,400                     6.2%
James E. Hanlon...................................               59,661                     1.3%
John E. Iverson...................................               50,000                     1.1%
Gary S. Jones.....................................               49,328                     1.1%
James A. Penney...................................               48,861                     1.1%
Richard J. Dyste..................................               47,661                     1.1%
H. Lee Johnson....................................               21,661                       *
R. Gregory Ferrer.................................                9,700                       *
All executive officers and directors as a group
(nine persons)....................................            1,606,194                    36.0%
</TABLE>

----------

 * 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 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. In addition to the Company, NTC has three other direct,
whollyowned 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
Six Limited Partnership ("NCP-6"), Northland Cable Properties Seven Limited
Partnership ("NCP-7"), Northland Cable Properties Eight Limited Partnership
("NCP-8") and Northland Premier Cable Limited Partnership ("Premier" and,
together with NCP-6, NCP-7 and NCP-8, the "Limited Partnerships"). 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.


                                       23
<PAGE>   24

        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, 1997, 1998 and 1999, the Company paid a Management Fee of $1.9
million, $2.8 million and $2.9 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, 1997, 1998 and
1999, the Company reimbursed Northland Communications Corporation approximately
$2.1 million, $2.6 million and $2.1 million, respectively, for such expenses.

ARRANGEMENTS BETWEEN NORTHLAND CABLE NEWS, INC. AND AFFILIATES

        Pursuant to an arrangement 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, 1997, 1998 and 1999, were $752,365,
$676,790 and $631,895, respectively.

ARRANGEMENTS WITH CABLE AD-CONCEPTS, INC.

        Cable Ad-Concepts, Inc. ("CAC") is a wholly owned indirect subsidiary of
NTC engaged in the business of developing and producing video commercial
advertisements for cablecast on certain systems owned by NTC. NTC affiliates
which utilize CAC's services are the Company, each of the Limited Partnerships,
NCPI and NCV. The aggregate amount of the fees charged by CAC to its affiliates
is based upon costs incurred in providing such advertisements, and is allocated
among participating affiliates based upon relative subscriber counts. Total fees
paid to CAC by the Company for the years ended December 31, 1997, 1998 and 1999,
were $251,899, $250,637 and $267,809, respectively.

ARRANGEMENTS WITH NORTHLAND CABLE SERVICES CORPORATION

        Northland Cable Services Corporation ("NCSC") is a wholly owned direct
subsidiary of NTC engaged in the business of providing software for billing
purposes and billing system support to the Company, NCPI, NCV and each of the
Limited Partnerships. The aggregate amount of the fees charged by NCSC to its
affiliates is based upon costs incurred in providing such billing services, and
is allocated among participating affiliates based upon relative subscriber
counts and revenues. Fees paid by the Company to NCSC for billing services for
the years ended December 31, 1997, 1998 and 1999, were $261,424, $332,690 and
$330,476, respectively.

OPERATING AGREEMENTS WITH AFFILIATES

        The Company is party to operating agreements with NCP-6 and NCP-7
pursuant to which, in certain instances, the Company serves as the local
managing agent for certain of NCP-6's and NCP-7's systems and, in other
instances, NCP-7 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, 1997, 1998 and 1999, the Company paid (received) affiliates an
aggregate of $9,616, $(41,954) and $43,805, respectively, for performing such
services for affiliates.

CAPITAL CONTRIBUTION

    Effective June 30, 1997, the Company received a non-cash capital
contribution of approximately $9.3 million which replaced, in its entirety, the
then outstanding net unsecured advances that had previously been owed to NTC and
other affiliates of the Company other than amounts due for normal operations,
management fees paid to NCC and for services provided by affiliated

                                       24
<PAGE>   25

entities as discussed above. As of December 31, 1999, the Company had no
outstanding unsecured indebtedness to affiliates. See Note 2 of the Company's
consolidated financial statements.

        (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.


                                       25
<PAGE>   26

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

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

<TABLE>
<CAPTION>
                                                                                                         SEQUENTIALLY
                                                                                                           NUMBERED
                                                                                                             PAGE
                                                                                                         ------------
<S>                                                                                                      <C>
   (1)   FINANCIAL STATEMENTS:

           Report of Independent Public Accountants................................................          ____

           Consolidated Balance Sheets--December 31, 1999 And 1998.................................          ____

           Consolidated Statements of Operations for the years
           ended December 31, 1999, 1998 and 1997..................................................          ____

           Consolidated Statements of Changes in Shareholder's Capital (Deficit) for
           the years ended December 31, 1999, 1998 and 1997........................................          ____

           Consolidated Statements of Cash Flows for the years
           ended December 31, 1999, 1998 and 1997..................................................          ____

           Notes to Financial Statements--December 31, 1999........................................          ____
</TABLE>

   (2) EXHIBITS:

       10.1 Amended and Restated Credit Agreement between Northland Cable
            Television, Inc. and First National Bank of Chicago as agent dated
            November 12, 1997.(1)

------------

(1) Incorporated by reference from the Company's Form S-4 Registration statement
declared effective February 17, 1998.

        (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, 1999.


                                       26
<PAGE>   27

                                   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, President

Date: 3/30/00


        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.

<TABLE>
<CAPTION>
                          SIGNATURES                                               CAPACITIES                             DATE
                          ----------                                               ----------                             ----
<S>                                                             <C>                                                    <C>
/s/                  John S. Whetzell                           Director, Chairman of the Board and                     ________
------------------------------------------------------------    President
                     John S. Whetzell


/s/                  Richard I. Clark                           Director, Vice President, Treasurer and                 ________
------------------------------------------------------------    Assistant Secretary
                     Richard I. Clark


/s/                    Gary S. Jones                            Vice President and Chief Financial Officer              ________
------------------------------------------------------------
                       Gary S. Jones


/s/                   John E. Iverson                           Director and Assistant Secretary                        ________
------------------------------------------------------------
                      John E. Iverson
</TABLE>


                                       27
<PAGE>   28

                                 EXHIBITS INDEX

<TABLE>
<CAPTION>
                                                               SEQUENTIALLY
  EXHIBIT                                                        NUMBERED
  NUMBER                 DESCRIPTION                               PAGE
  -------                -----------                           ------------
<S>                <C>                                         <C>
  27.0             Financial Data Schedule
</TABLE>



                                       28
<PAGE>   29

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

Consolidated Financial Statements
As of December 31, 1999 and 1998
Together with Auditors' Report


<PAGE>   30


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, 1999
and 1998, 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, 1999. 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 generally accepted auditing
standards. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.



Seattle, Washington
February 24, 2000


<PAGE>   31


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

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                    -------------------------------
                                                                                        1999              1998
                                                                                    ------------       ------------
                                               ASSETS
<S>                                                                                 <C>                <C>
CURRENT ASSETS:
    Cash                                                                            $  1,366,050       $  2,750,972
    Due from affiliates                                                                  127,790            106,454
    Accounts receivable                                                                2,226,257          2,043,581
    Prepaid expenses                                                                     514,883            285,591
                                                                                    ------------       ------------
               Total current assets                                                    4,234,980          5,186,598
                                                                                    ------------       ------------


INVESTMENT IN CABLE TELEVISION PROPERTIES:
    Property and equipment, at cost                                                   95,320,711         90,024,509
    Less -- Accumulated depreciation                                                 (40,226,261)       (33,113,526)
                                                                                    ------------       ------------
                                                                                      55,094,450         56,910,983
    Franchise agreements (net of accumulated amortization of $29,899,513 and
       $20,153,805, respectively)                                                     70,564,567         80,571,948
    Other intangible assets (net of accumulated amortization of $5,706,249 and
       $3,867,502, respectively)
                                                                                       7,387,120          9,039,564
    Goodwill (net of accumulated amortization of $2,220,383 and $2,047,272,
       respectively)                                                                   4,704,050          4,877,161
                                                                                    ------------       ------------
                                                                                     137,750,187        151,399,656
                                                                                    ------------       ------------
               Total assets                                                         $141,985,167       $156,586,254
                                                                                    ============       ============



                               LIABILITIES AND SHAREHOLDER'S DEFICIT

CURRENT LIABILITIES:
    Accounts payable                                                                $    620,403       $    773,233
    Subscriber prepayments                                                             1,830,231          1,846,362
    Accrued expenses                                                                   6,040,163          6,250,827
    Converter deposits                                                                   111,703            109,311
    Due to affiliates                                                                     48,671            246,244
    Current portion of notes payable                                                   3,000,000          2,250,000
                                                                                    ------------       ------------
              Total current liabilities                                               11,651,171         11,475,977

NOTES PAYABLE                                                                        172,090,000        175,090,000
                                                                                    ------------       ------------
              Total liabilities                                                      183,741,171        186,565,977
                                                                                    ------------       ------------

COMMITMENTS AND CONTINGENCIES (Note 9)

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
                                                                                      11,560,527         11,560,527
    Accumulated deficit                                                              (53,316,531)       (41,540,250)
                                                                                    ------------       ------------
              Total shareholder's deficit                                            (41,756,004)       (29,979,723)
                                                                                    ------------       ------------
              Total liabilities and shareholder's deficit                           $141,985,167       $156,586,254
                                                                                    ============       ============
</TABLE>


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


<PAGE>   32

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


                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                                  December 31,
                                                               --------------------------------------------------
                                                                   1999               1998               1997
                                                               ------------       ------------       ------------
<S>                                                            <C>                <C>                <C>
REVENUES:
    Service revenues                                           $ 58,216,550       $ 55,325,877       $ 38,765,443
    Programming and production revenues from affiliates
                                                                    631,865            676,790            752,365
                                                               ------------       ------------       ------------
              Total revenues                                     58,848,415         56,002,667         39,517,808
                                                               ------------       ------------       ------------
OPERATING EXPENSES:
    Cable system operations (including $236,867, $118,020
       and $230,139, net paid to affiliates)
                                                                 19,326,047         18,566,360         12,913,220
    General and administrative (including $2,584,442,
       $2,755,688 and $2,350,772 paid to affiliates)

                                                                 10,724,647         10,227,795          7,290,209
    Management fees paid to parent                                2,896,228          2,760,263          1,935,302
    Depreciation and amortization                                19,340,321         19,792,488         12,790,514
                                                               ------------       ------------       ------------
              Total operating expenses                           52,287,243         51,346,906         34,929,245
                                                               ------------       ------------       ------------
              Income from operations                              6,561,172          4,655,761          4,588,563

OTHER INCOME (EXPENSE):
    Interest expense                                            (17,842,346)       (17,625,998)       (10,240,023)
    Other, net (Note 7)                                            (495,107)         5,211,946            100,825
                                                               ------------       ------------       ------------
NET LOSS                                                       $(11,776,281)      $ (7,758,291)      $ (5,550,635)
                                                               ============       ============       ============
</TABLE>


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


<PAGE>   33


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


           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S DEFICIT


<TABLE>
<CAPTION>
                                   Common Stock and
                                  Additional Paid-in
                                       Capital
                                -----------------------       Accumulated
                                Shares         Amount           Deficit             Total
                                ------      -----------      ------------       ------------
<S>                             <C>         <C>              <C>                <C>
BALANCE, December 31, 1996      10,000      $ 2,222,334      $(28,231,324)      $(26,008,990)

  Capital contribution               -        9,338,193                 -          9,338,193

  Net loss                           -                -        (5,550,635)        (5,550,635)
                                ------      -----------      ------------       ------------
BALANCE, December 31, 1997      10,000       11,560,527       (33,781,959)       (22,221,432)

  Net loss                           -                -        (7,758,291)        (7,758,291)
                                ------      -----------      ------------       ------------
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)
                                ======      ===========      ============       ============
</TABLE>

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


<PAGE>   34


                 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, 1999, 1998 AND 1997


<TABLE>
<CAPTION>
                                                                        1999               1998                1997
                                                                    ------------       ------------       ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                 <C>                <C>                <C>
    Net loss                                                        $(11,776,281)      $ (7,758,291)      $ (5,550,635)
    Adjustments to reconcile net loss to net cash provided by
       operating activities --
          Depreciation and amortization                               19,340,321         19,792,488         12,790,514
          Amortization of loan costs                                     914,554            907,760            429,547
          Loss (gain) on disposal of assets                              671,398         (5,093,997)           (76,311)
          (Increase) decrease in operating assets:
                 Due from affiliates                                     (21,336)           (85,909)            15,584
                 Accounts receivable                                    (189,897)          (688,576)           (65,165)
                 Prepaid expenses                                       (229,292)             5,975            (18,320)
          (Decrease) increase in operating liabilities:
                 Accounts payable                                       (152,830)           111,092           (117,583)
                 Due to affiliate                                       (197,573)            28,818           (190,266)
                 Subscriber prepayments                                  (13,739)           745,953            238,297
                 Other current liabilities                              (210,664)         1,659,217          1,638,578
                                                                    ------------       ------------       ------------
                 Net cash provided by operating activities
                                                                       8,134,661          9,624,530          9,094,240
                                                                    ------------       ------------       ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisition of cable systems                                              --        (77,711,038)        (6,495,315)
    Investment in property and equipment                              (7,061,920)        (6,279,489)        (4,012,320)
    Funds deposited in escrow for purchase of cable television
       system                                                                 --                 --           (690,000)
    Proceeds from disposition of cable systems
                                                                              --          7,115,000                 --
    Insurance proceeds and other                                          26,235             24,327            156,887
    Franchise fees and other intangibles                                (133,898)          (388,912)           (62,249)
                                                                    ------------       ------------       ------------
                 Net cash used in investing activities
                                                                      (7,169,583)       (77,240,112)       (11,102,997)
                                                                    ------------       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from notes payable                                     $         --       $ 77,991,779       $105,000,000
    Principal payments on notes payable                               (2,250,000)        (8,614,292)       (99,200,325)
    Loan fees                                                           (100,000)          (249,514)        (5,038,574)
                                                                    ------------       ------------       ------------
                 Net cash (used in) provided by financing
                    activities                                        (2,350,000)        69,127,973            761,101
                                                                    ------------       ------------       ------------
(DECREASE) INCREASE IN CASH                                           (1,384,922)         1,512,391         (1,247,656)

CASH, beginning of year                                                2,750,972          1,238,581          2,486,237
                                                                    ------------       ------------       ------------
CASH, end of year                                                   $  1,366,050       $  2,750,972       $  1,238,581
                                                                    ============       ============       ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
       Cash paid for interest                                       $ 16,901,071       $ 16,753,345       $  8,977,394
                                                                    ============       ============       ============
       Cash paid for state income taxes                             $     28,746       $     17,946       $      4,654
                                                                    ============       ============       ============
</TABLE>

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

<PAGE>   35

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


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1999



1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:

Formation and Business

Northland Cable Television, Inc. (NCTV), a Washington corporation, was formed to
own and operate cable television systems. As of December 31, 1999, NCTV had 90
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. NCTV and NCN are collectively
referred to as the Company.

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 four limited partnerships, 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 to cable systems owned
by managed limited partnerships of 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 certain noncable related assets.

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.

Acquisition of Cable Television Systems

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

<PAGE>   36
                                     - 2 -


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. Replacements, renewals and
improvements are capitalized. Maintenance and repairs are charged to expense as
incurred. Depreciation of property and equipment is provided using the
straight-line method over the following estimated service lives:

<TABLE>
<CAPTION>
<S>                                                           <C>
   Buildings                                                  20 years
   Distribution plant                                         10 years
   Other equipment and leasehold improvements                 5-20 years
</TABLE>

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. To the
extent the estimated undiscounted future cash inflows attributable to the asset,
less estimated undiscounted future cash outflows, is less than the carrying
amount, an impairment loss would be recognized.

Intangible Assets

Costs assigned to goodwill, franchise agreements and loan fees and other
intangible assets are amortized using the straight-line method over the
following estimated useful lives:

<TABLE>
<CAPTION>
<S>                                                           <C>
   Franchise agreements                                       10-20 years
   Other intangible assets                                    1-10 years
   Goodwill                                                   40 years
</TABLE>

Revenue Recognition

Cable television service revenue including service, maintenance and installation
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 $2,425,747, $2,223,165, and $1,821,223,
respectively, in 1999, 1998 and 1997. License fee revenue is recognized in the
period service is provided.

Derivatives

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. As discussed in Note 6, the Company 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. Gains or losses
associated with changes in fair values of these swaps and the underlying
notional principal amounts are deferred and recognized against interest expense
over the term of the agreements in the consolidated statements of operations.

<PAGE>   37
                                     - 3 -


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. The use of derivatives does not
have a significant effect on the Company's result of operations or its financial
position.

Recently Issued Accounting Pronouncements

Statement of Financial Accounting Standards (SFAS) No. 133 - In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged item in the consolidated
statements of operations, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that are subject to
hedge accounting.

Pursuant to SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB No. 133 - an Amendment to
FASB Statement No. 133," the effective date of SFAS No. 133 has been deferred
until fiscal years beginning after January 15, 2000. SFAS No. 133 cannot be
applied retroactively. SFAS No. 133 must be applied to (a) derivative
instruments and (b) certain derivative instruments embedded in hybrid contracts
that were issued, acquired, or substantively modified after December 31, 1998
(and, at the Company's election, before January 1, 1999).

The Company has not yet quantified the impacts of adopting SFAS No. 133 on the
financial statements and has not determined the timing or method of adoption of
SFAS No. 133. However, the statement could increase volatility in earnings and
other comprehensive income.

Staff Accounting Bulletin (SAB) No. 101 - In December 1999, the SEC released SAB
No. 101 "Revenue Recognition in Financial Statements." This bulletin will become
effective for the quarter ended June 30, 2000. This bulletin establishes more
clearly defined revenue recognition criteria, than previously existing
accounting pronouncements, and specifically addresses revenue recognition
requirements for nonrefundable fees, such as installation fees, collected by a
company upon entering into an arrangement with a customer. The Company believes
that the effects of this bulletin will not have a material impact on the
Company's financial position or results of operations.

Estimates Used in Financial Statement Presentation

The preparation of financial statements in conformity with generally accepted
accounting principles 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.

<PAGE>   38
                                     - 4 -


2. 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. The
Company was charged $2,896,228, $2,760,263, and $1,935,302 by NTC in 1999, 1998
and 1997, respectively.

Program License and Production Fees

NCN receives monthly program license fees from affiliated entities for
programming produced by NCN. Total license fees earned from affiliates during
1999, 1998 and 1997 were $631,895, $676,790, and $752,365, respectively.

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 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. Management believes that the methods used
to allocate services to the Company are reasonable. Amounts charged for these
services were $2,121,890, $2,622,489, and $2,057,916 for 1999, 1998 and 1997,
respectively.

In 1999, 1998 and 1997, the Company was charged software installation charges
and billing maintenance fees for billing system support of by NCSC, amounting to
$330,476, $332,690, and $261,424, respectively. CAC billed the Company $267,809,
$250,637, and $251,899, for advertising services in 1999, 1998 and 1997,
respectively.

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
(received) $43,805, $(41,954), and $9,616, net, under the terms of these
agreements during 1999, 1998 and 1997, respectively.

<PAGE>   39
                                     - 5 -


3. 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 6 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, 1999 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. 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.

<TABLE>
<CAPTION>
                                         For the Year Ended December 31,
                                -----------------------------------------------
                                    1999             1998              1997
                                -----------       -----------       -----------
<S>                             <C>               <C>               <C>
INCOME STATEMENT INFORMATION:
Revenues from affiliates        $ 1,352,276       $ 1,436,970       $ 1,516,380
Less: intercompany revenue         (720,411)         (760,180)         (764,015)
                                -----------       -----------       -----------
          Total revenues            631,865           676,790           752,365

Operating expenses               (1,008,165)       (1,098,153)       (1,128,360)
Other, net                          (19,265)           (5,594)              660
                                -----------       -----------       -----------
Net loss                        $  (395,565)      $  (426,957)      $  (375,335)
                                ===========       ===========       ===========
</TABLE>

<TABLE>
<CAPTION>
                                                       December 31,
                                             -----------------------------
                                                 1999              1998
                                             -----------       -----------
<S>                                          <C>               <C>
BALANCE SHEET INFORMATION:
Current assets                               $ 2,141,332       $ 1,814,625
Less: intercompany elimination                (2,032,390)       (1,413,971)
                                             -----------       -----------
          Total assets                       $   108,942       $   400,654
                                             ===========       ===========
          Current and total liabilities
                                             $    50,204       $    48,342
                                             ===========       ===========
</TABLE>

4. PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>
                                                      December 31,
                                            -------------------------------
                                                1999               1998
                                            -----------         -----------
<S>                                         <C>                 <C>
Land and buildings                          $ 2,320,154         $ 2,161,451
Distribution plant                           87,938,686          83,188,349
Other equipment                               4,680,900           4,332,951
Leasehold improvements                           32,033              32,033
Construction in progress                        348,938             309,725
                                            -----------         -----------
                                            $95,320,711         $90,024,509
                                            ===========         ===========
</TABLE>

<PAGE>   40
                                     - 6 -


5. ACCRUED EXPENSES:

<TABLE>
<CAPTION>
                                                 December 31,
                                        ----------------------------
                                           1999              1998
                                        ----------        ----------
<S>                                     <C>               <C>
Programmer license fees                 $1,839,729        $2,408,360
Franchise fees                           1,220,708         1,179,518
Interest                                 1,382,853         1,356,132
Taxes                                      794,564           285,111
Payroll                                    312,991           264,191
Pole rental                                197,196           176,576
Other                                      292,122           580,939
                                        ----------        ----------
                                        $6,040,163        $6,250,827
                                        ==========        ==========
</TABLE>

6. NOTES PAYABLE:

<TABLE>
<CAPTION>
                                                                    December 31,
                                                         ----------------------------------
                                                             1999                 1998
                                                         ------------          ------------
<S>                                                      <C>                   <C>
Revolving credit and term loan amended in 1997           $ 75,090,000          $ 77,340,000

Senior subordinated notes                                 100,000,000           100,000,000
                                                         ------------          ------------
                                                          175,090,000           177,340,000
Less-current portion                                        3,000,000             2,250,000
                                                         ------------          ------------
                                                         $172,090,000          $175,090,000
                                                         ============          ============
</TABLE>

Revolving Credit and Term Loan

On November 12, 1997, the Company entered into an amended and restated revolving
credit and term loan facility (the Facility). The Facility provides for
borrowings up to $100,000,000,including a $75,000,000 term loan and a
$25,000,000 revolving credit facility, both of which mature December 31, 2005.
The 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 8.49% (weighted average). Graduated principal and
interest payments are due quarterly until maturity on December 31, 2005. 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, 1999, $14,673,500 was available to borrow 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, including
a pro forma debt service ratio of 1.20 to 1 and a leverage ratio of 6.75 to 1,
among other restrictions. The Company submits quarterly debt compliance reports
to its creditor under this arrangement. As of December 31, 1999, the Company was
in compliance with the terms of the loan agreement.

<PAGE>   41
                                     - 7 -


Senior Subordinated Notes

On November 12, 1997, the Company completed the issuance and sale of
$100,000,000 in principal amount of 10.25% Senior Subordinated Notes (the Notes)
due November 15, 2007. The Company used the proceeds to repay a portion of the
amounts outstanding under the Facility and to pay fees and expenses incurred in
connection with the issuance. The estimated fair value of the $100,000,000 Notes
at December 31, 1999, was $99,930,000, 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:

<TABLE>
<CAPTION>
         Year                         Percentage
--------------------                  ----------
<S>                                    <C>
2002                                   105.125%
2003                                   103.417%
2004                                   101.708%
2005 and thereafter                    100.000%
</TABLE>

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
which require the maintenance of certain ratios, including a debt to cash flow
ratio of 6.75 to 1. The Company submits quarterly debt compliance reports to a
trustee. As of December 31, 1999, 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.

Principal Payments

Annual maturities of notes payable after December 31, 1999 based on amounts
outstanding at December 31, 1999 are as follows:

<TABLE>
<CAPTION>
<S>                                           <C>
               2000                           $  3,000,000
               2001                              7,000,000
               2002                             11,000,000
               2003                             14,750,000
               2004                             18,000,000
               Thereafter                      121,340,000
                                              ------------
                                              $175,090,000
                                              ============
</TABLE>

<PAGE>   42
                                     - 8 -


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, 1999, the Company had
outstanding two interest rate swap agreements with its bank, having a notional
principal amount of $68,750,000. These agreements effectively change the
Company's interest rate exposure to fixed rate of 5.70% (weighted average), plus
an applicable margin based on certain financial covenants (the margin at
December 31, 1999 was 2.75%).

<TABLE>
<CAPTION>
        Maturity Date             Fixed Rate         Notional Amount
        -------------             ----------         ---------------
<S>                               <C>                <C>
December 31, 2000                   5.78%              $61,750,000
December 4, 2000                    4.98%              $7,000,000
</TABLE>

At December 31, 1999, the Company would have received approximately $450,904 to
settle this agreement based on fair value estimate received from the financial
institution.

7. OTHER, NET:

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

<TABLE>
<CAPTION>
                                                           For the Years Ended
                                                              December 31,
                                              --------------------------------------------
                                                1999             1998              1997
                                              ---------        ----------         --------
<S>                                           <C>              <C>                <C>
(LOSS) GAIN ON DISPOSAL OF ASSETS             $(671,398)       $5,093,997         $ 76,311

INTEREST INCOME                                 205,038           135,895           29,166

OTHER                                           (28,747)          (17,946)          (4,652)
                                              ---------        ----------         --------
                                              $(495,107)       $5,211,946         $100,825
                                              =========        ==========         ========
</TABLE>

8. 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.

<PAGE>   43
                                     - 9 -


The primary components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                                                December 31,
                                                     ----------------------------------
                                                         1999                  1998
                                                     ------------          ------------
<S>                                                  <C>                   <C>
DEFERRED TAX ASSETS:
    Net operating loss carryforward                  $ 19,380,000          $ 15,402,000
    Valuation allowance                               (16,080,000)          (12,002,000)
                                                     ------------          ------------
                                                        3,300,000             3,400,000
DEFERRED TAX LIABILITIES:
    Property and equipment                              3,300,000             3,400,000
                                                     ------------          ------------
                                                     $         --          $         --
                                                     ============          ============
</TABLE>

The federal income tax net operating loss carryforward of approximately
$57,000,000 expires from 2003 through 2019. 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 $4,078,000, $3,316,000, and $2,000,000 for the years
ended December 31, 1999, 1998 and 1997, 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.

9. 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 $915,912, $896,711 and $601,103 in 1999, 1998 and
1997, respectively. Minimum lease payments to the end of the lease terms are as
follows:

<TABLE>
<CAPTION>
<S>                                          <C>
          2000                               $125,986
          2001                                119,938
          2002                                116,379
          2003                                115,697
          2004                                102,388
    Thereafter                                177,338
                                             --------
                                             $757,726
                                             ========
</TABLE>

<PAGE>   44
                                     - 10 -


Effects of Regulation

On February 8, 1996, the Telecommunications Act of 1996 (the 1996 Act) was
enacted. This act dramatically changed federal telecommunications laws and the
future competitiveness of the industry. Many of the changes called for by the
1996 Act will not take effect until the Federal Communications Commission (FCC)
issues new regulations which, in some cases, may not be completed for a few
years. Because of this, the full impact of the 1996 Act on the Company's
operations cannot be determined at this time. A summary of the provisions
affecting the cable television industry, more specifically those affecting the
Company's operations, follows.

Cable Programming Service Tier Regulation

FCC regulation of rates for cable programming service tiers has been eliminated
for small cable systems owned by small companies. Small cable systems are those
having 50,000 or fewer subscribers which are owned by companies with fewer than
1% of national cable subscribers (approximately 600,000) and no more than $250
million in annual revenue. NCTV qualifies as a small cable company and all but
two of the Company's cable systems qualify as small cable systems. Basic tier
rates remain subject to regulations by the local franchising authority under
most circumstances until effective competition exists. The 1996 Act expands the
definition of effective competition to include the offering of video programming
services directly to subscribers in a franchised area served by a local
telephone exchange carrier, its affiliates or any multichannel video programming
distributor which uses the facilities of the local exchange carrier. The FCC has
not yet determined the penetration criteria that will trigger the presence of
effective competition under these circumstances.

Telephone Companies

The 1996 Act allows telephone companies to offer video programming services
directly to customers in their service areas immediately upon enactment. They
may provide video programming as a cable operator fully subject to any provision
of the 1996 Act; a radio-based multichannel programming distributor not subject
to any provisions of the 1996 Act; or through nonfranchised "open video systems"
offering nondiscriminatory capacity to unaffiliated programmers, subject to
select provisions of the 1996 Act. Although management's opinion is that the
probability of competition from telephone companies in rural areas is unlikely
in the near future, there are no assurances that such competition will not
materialize.

The 1996 Act encompasses many other aspects of providing cable television
service including prices for equipment, discounting rates to multiple dwelling
units, lifting of anti-trafficking restrictions, cable-telephone cross ownership
provisions, pole attachment rate formulas, rate uniformity, program access,
scrambling and censoring of Public, Educational and Governmental and leased
access channels.

<PAGE>   45
                                     - 11 -


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, 1999, 1998 and 1997, the Company was
charged $76,338, $76,090 and $55,526, respectively, by the fund. As of December
31, 1999, the fund had a balance of $360,815.

10. ACQUISITION OF SYSTEMS AND DISPOSITION OF ASSETS:

On March 31, 1997, the Company acquired substantially all of the operating
assets and franchise rights of the cable television systems in and around the
communities of Marlin, Madisonville and Buffalo, Texas. These systems serve
approximately 3,600 subscribers. The total purchase price was approximately
$5,250,000.

On January 2, 1998, the Company acquired substantially all operating assets and
franchise rights of cable television systems serving approximately 35,700 basic
subscribers in or around the communities of Aiken, Greenwood, Saluda, Ware
Shoals, McCormick and Edgefield, all in the state of South Carolina from
Intermedia Partners of Carolina, and Robin Cable Systems L.P. The systems were
acquired at a purchase price of $69,975,000 adjusted at closing for the
proration of certain revenues and expenses. The acquisition was financed through
borrowings under the senior credit facility.

On May 15, 1998, the Company sold all of its cable operations in the state of
Oregon (the "Woodburn System") to North Willamette Telecom, Inc. The net
proceeds from the sale of the system were approximately $6,875,000, of which
$6,424,000 was utilized to reduce amounts outstanding under the Senior Credit
Facility. The Woodburn System served approximately 4,300 basic subscribers.

On December 1, 1998, the Company acquired the operating assets and franchise
rights to cable systems serving approximately 5,100 basic subscribers in the
communities of Mt. Shasta, McCloud, Weed and Dunsmuir, California, located in
Shasta and Siskiyou Counties (the "Mt. Shasta System") from MediaOne Group, Inc.
The systems were acquired at a purchase price of $7,605,000 adjusted at closing
for the proration of certain revenues and expenses. The acquisition was financed
through borrowings under the Senior Credit Facility.

<PAGE>   46
                                     - 12 -


Pro forma operating results (unaudited) of the Company for 1998, assuming the
acquisitions and disposition described above had been made at the beginning of
1998, follow:

<TABLE>
<CAPTION>
                                                      For the year ended
                                                         December 31,
                                                             1998
                                                      ------------------
                                                          (unaudited)
<S>                                                   <C>
        Service revenues                                 $ 57,191,047
                                                         ============
        Net loss                                         $(14,054,680)
                                                         ============
</TABLE>