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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

|                                    |  |                               
|----------------------------------- |  | ------------------------------
|For the Quarter Ended
June 30, 2003 |  | Commission File Number
1-13332

Cabletel Communications Corp.(Exact name of registrant as specified in its charter)

|                                                                              |  |                                            
|----------------------------------------------------------------------------- |  | -------------------------------------------
|Ontario, Canada(State or other jurisdiction of
incorporation or organization) |  | 8647 8526(Canadian Federal Tax Account No.)

230 Travail Rd.
Markham, Ontario, Canada L3S 3J1
(Address of principal executive offices)

Registrants telephone number, including area code: (905) 475-1030

Indicate by check mark whether 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   þ      No   o

Indicate the number of shares outstanding of each of the Registrants classes
of common stock as of the latest practicable date:

|                           |  |                                  
|-------------------------- |  | ---------------------------------
|Class                      |  | Outstanding as at August 13, 2003
|                           |  |                                  
|Common Stock, no par value |  | 7,167,612                        



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CABLETEL COMMUNICATIONS CORP.
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 2003

INDEX

|         |  |                                                                                                |  |          |       | 
|-------- |  | ---------------------------------------------------------------------------------------------- |  | -------- | ----- | 
|         |  |                                                                                                |  | Page No.
|         |  |                                                                                                |  |         
|Part I.  |  | Financial Information                                                                          |  |          | 3     | 
|         |  |                                                                                                |  |          |       | 
|Item 1.  |  | Financial Statements                                                                           |  |          | 3     | 
|         |  |                                                                                                |  |          |       | 
|         |  | Balance Sheet as at
June 30, 2003 and December 31, 2002                                        |  |          | 3     | 
|         |  |                                                                                                |  |          |       | 
|         |  | Statement of Operations and Deficit
For the 3 and 6 month periods ended June 30, 2003 and 2002 |  |          | 4     | 
|         |  |                                                                                                |  |          |       | 
|         |  | Statement of Cash Flows
For the 3 and 6 month periods ended June 30, 2003 and 2002             |  |          | 5     | 
|         |  |                                                                                                |  |          |       | 
|         |  | Notes to Financial Statements                                                                  |  |          | 6-25  | 
|         |  |                                                                                                |  |          |       | 
|Item 2.  |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations          |  |          | 26-34 | 
|         |  |                                                                                                |  |          |       | 
|Item 3.  |  | Quantitative and Qualitative Disclosures of Market Risk                                        |  |          | 35    | 
|         |  |                                                                                                |  |          |       | 
|Item 4.  |  | Controls and Procedures                                                                        |  |          | 38    | 
|         |  |                                                                                                |  |          |       | 
|Part II. |  | Other Information                                                                              |  |          | 39    | 
|         |  |                                                                                                |  |          |       | 
|Item 1.  |  | Legal Proceedings                                                                              |  |          | 39    | 
|         |  |                                                                                                |  |          |       | 
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                               |  |          | 39    | 

The Company is a Foreign Private Issuer as defined in Rule 3b-4 under
the Securities Exchange Act of 1994, as amended. Although as a Foreign
Private Issuer the Company is eligible to file reports on Form 6-K, the
Company has voluntarily elected to file quarterly reports on Form 10-Q.

2



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PART I.     FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

CABLETEL COMMUNICATIONS CORP.

CONSOLIDATED BALANCE SHEETS
(Canadian Funds)
Unaudited

|                                       |                                                                     |                                                      |             |             |            |              |             |            |            | 
|-------------------------------------- | ------------------------------------------------------------------- | ---------------------------------------------------- | ----------- | ----------- | ---------- | ------------ | ----------- | ---------- | ---------- | 
|                                       |                                                                     |                                                      |             |             |            |              |             | Audited   
|                                       |                                                                     |                                                      |             | June 30,    |            | December 31,
|                                       |                                                                     |                                                      |             | 2003        |            | 2002        
|                                       |                                                                     |                                                      |             |             |            |             
|                                       |                                                                     |                                                      |             | (Unaudited) |            |              |             |           
|ASSETS                                 |                                                                     |                                                      |             |             |            |              |             |           
|CURRENT                                |                                                                     |                                                      |             |             |            |              |             |           
|                                       | Cash                                                                |                                                      | $           | 29,706      |            |              | $           | 63,169     |           
|                                       | Accounts receivable
(net of allowance of $143,852; 2002  $109,914) |                                                      |             | 9,666,095   |            |              |             | 14,291,574 |           
|                                       | Inventory (Note 2)                                                  |                                                      |             | 9,517,152   |            |              |             | 10,488,445 |           
|                                       | Other receivables (Note 9i)                                         |                                                      |             | 242,500     |            |              |             | 235,000    |           
|                                       | Income taxes recoverable                                            |                                                      |             |            |            |              |             | 120,000    |           
|                                       | Prepaid expenses and deposits                                       |                                                      |             | 249,112     |            |              |             | 1,407,169  |           
|                                       |                                                                     |                                                      |             |             |            |              |             |           
|                                       |                                                                     |                                                      | 19,704,565  |             |            |              | 26,605,357  |           
|PROPERTY, PLANT AND EQUIPMENT(Note 3)  |                                                                     |                                                      | 1,410,590   |             |            |              | 2,198,086   |           
|DEFERRED REFINANCING FEES(Note 8)      |                                                                     |                                                      | 500,000     |             |            |              | 633,334     |           
|GOODWILL                               |                                                                     |                                                      |            |             |            |              | 161,616     |           
|PRODUCT DEVELOPMENT COSTS              |                                                                     |                                                      |             |             |            |              |             |           
|                                       | (net of amortization of $120,770; 2002  $103,517)                  |                                                      |             | 14,378      |            |              |             | 31,631     |           
|                                       |                                                                     |                                                      |             |             |            |              |             |           
|                                       |                                                                     | $                                                    | 21,629,533  |             |            | $            | 29,630,024  |           
|                                       |                                                                     |                                                      |             |             |            |              |             |           
|LIABILITIES                            |                                                                     |                                                      |             |             |            |              |             |           
|CURRENT                                |                                                                     |                                                      |             |             |            |              |             |           
|                                       | Bank indebtedness (Note 4)                                          |                                                      | $           | 9,851,535   |            |              | $           | 12,461,424 |           
|                                       | Accounts payable                                                    |                                                      |             | 4,898,367   |            |              |             | 6,736,089  |           
|                                       | Accrued liabilities                                                 |                                                      |             | 2,001,157   |            |              |             | 1,994,647  |           
|                                       | Current portion of long-term debt (Note 5)                          |                                                      |             | 1,956,588   |            |              |             | 2,067,558  |           
|                                       |                                                                     |                                                      |             |             |            |              |             |           
|                                       |                                                                     |                                                      | 18,707,647  |             |            |              | 23,259,718  |           
|LONG-TERM DEBT(Note 5)                 |                                                                     |                                                      | 498,039     |             |            |              | 1,154,088   |           
|                                       |                                                                     |                                                      |             |             |            |              |             |           
|                                       |                                                                     |                                                      | 19,205,686  |             |            |              | 24,413,806  |           
|                                       |                                                                     |                                                      |             |             |            |              |             |           
|COMMITMENTS AND CONTINGENCIES(Note 10) |                                                                     |                                                      |             |             |            |              |             |           
|                                      
|SHAREHOLDERS EQUITY                   |                                                                     |                                                      |             |             |            |              |             |           
|CAPITAL STOCK(Note 6)                  |                                                                     |                                                      |             |             |            |              |             |           
|                                       | AUTHORIZED                                                          |                                                      |             |             |            |              |             |            |           
|                                       |                                                                     | Unlimited First preferred shares, issuable in
series |             |             |            |              |             |            |            | 
|                                       |                                                                     | Unlimited Common shares                              |             |             |            |              |             |            |            | 
|                                       | ISSUED                                                              |                                                      |             |             |            |              |             |            |           
|                                       |                                                                     | 7,167,612 Common shares (2002  7,167,612)           |             |             | 16,136,761 |              |             |            | 16,136,761 | 
|Paid in Capital  Warrant              |                                                                     |                                                      | 164,000     |             |            |              | 164,000     |           
|DEFICIT                                |                                                                     |                                                      | (13,876,914 | )           |            |              | (11,084,543 | )         
|                                       |                                                                     |                                                      |             |             |            |              |             |           
|                                       |                                                                     |                                                      | 2,423,847   |             |            |              | 5,216,218   |           
|                                       |                                                                     |                                                      |             |             |            |              |             |           
|                                       |                                                                     | $                                                    | 21,629,533  |             |            | $            | 29,630,024  |           
|                                       |                                                                     |                                                      |             |             |            |              |             |           

See accompanying notes to financial statements.

3



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CABLETEL COMMUNICATIONS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Canadian Funds)
(Unaudited)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |           |  
|---------------------------------- | ---------------------------------------- | - | --------------------- | --------- | --------------------- | - | ----------- | --------- | ---- | - | ----------- | --------- | - | - | ----------- | --------- | -
|                                   |                                          |   | For the Three Month   |           | For the Six Month    
|                                   |                                          |   | Period Ended June 30, |           | Period Ended June 30,
|                                   |                                          |   |                       |           |                      
|                                   |                                          |   | 2003                  |           | 2002                  |   | 2003        |           | 2002
|                                   |                                          |   |                       |           |                       |   |             |           |     
|SALES                              |                                          | $ | 8,776,970             |           |                       | $ | 14,960,379  |           |      | $ | 19,895,317  |           |   | $ | 28,144,065  |          
|COST OF SALES                      |                                          |   | 8,073,510             |           |                       |   | 12,297,387  |           |      |   | 17,193,163  |           |   |   | 23,033,059  |          
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|GROSS PROFIT                       |                                          |   | 703,460               |           |                       |   | 2,662,992   |           |      |   | 2,702,154   |           |   |   | 5,111,006   |          
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|EXPENSES                           |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|                                   | Selling, general and administrative      |   |                       | 2,074,136 |                       |   |             | 2,248,282 |      |   |             | 3,998,155 |   |   |             | 4,396,051 |  
|                                   | Special charge (Note 11)                 |   |                       | 280,000   |                       |   |             |          |      |   |             | 280,000   |   |   |             |          |  
|                                   | Amortization                             |   |                       | 44,817    |                       |   |             | 55,220    |      |   |             | 95,223    |   |   |             | 120,305   |  
|                                   | Interest  bank indebtedness             |   |                       | 164,051   |                       |   |             | 179,261   |      |   |             | 324,857   |   |   |             | 326,785   |  
|                                   | Interest  long-term debt                |   |                       | 77,816    |                       |   |             | 76,574    |      |   |             | 168,894   |   |   |             | 94,259    |  
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|                                   |                                          |   | 2,640,820             |           |                       |   | 2,559,337   |           |      |   | 4,867,129   |           |   |   | 4,937,400   |          
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|INCOME (LOSS) BEFORE THE FOLLOWING |                                          |   | (1,937,360            | )         |                       |   | 103,655     |           |      |   | (2,164,975  | )         |   |   | 173,606     |          
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|                                   | Loss on disposition of assets            |   |                       |          |                       |   |             |          |      |   |             | 31,269    |   |   |             |          |  
|                                   | Write down of long-lived assets
(Note 3) |   |                       | 400,000   |                       |   |             |          |      |   |             | 400,000   |   |   |             |           |  
|                                   | Write off of goodwill (Note 12)          |   |                       | 198,606   |                       |   |             |          |      |   |             | 198,606   |   |   |             |           |  
|                                   | Write off of other assets (Note 12)      |   |                       |          |                       |   |             | 604,809   |      |   |             |          |   |   |             | 604,809   |  
|                                   | Loss on settlement of debt (Note 5ii)    |   |                       |          |                       |   |             | 164,000   |      |   |             |          |   |   |             | 164,000   |  
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|                                   |                                          |   | 598,606               |           |                       |   | 768,809     |           |      |   | 629,875     |           |   |   | 768,809     |          
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|LOSS BEFORE INCOME TAXES           |                                          |   | (2,535,966            | )         |                       |   | (665,154    | )         |      |   | (2,794,850  | )         |   |   | (595,203    | )        
|                                   | Income taxes                             |   |                       | 9,000     |                       |   |             | 9,000     |      |   |             | (2,479    | ) |   |             | 18,000    |  
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|NET LOSS FOR THE PERIOD            |                                          | $ | (2,544,966            | )         |                       | $ | (674,154    | )         |      | $ | (2,792,371  | )         |   | $ | (613,203    | )        
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|DEFICIT,beginning of period        |                                          | $ | (11,331,948           | )         |                       | $ | (10,005,475 | )         |      | $ | (11,084,543 | )         |   | $ | (10,066,426 | )        
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|DEFICIT,end of period              |                                          | $ | (13,876,914           | )         |                       | $ | (10,679,629 | )         |      | $ | (13,876,914 | )         |   | $ | (10,679,629 | )        
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|Earnings (loss) per share(Note 7)  |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|                                   | Basic                                    |   |                       | ($0.36    | )                     |   |             | ($0.09    | )    |   |             | ($0.39    | ) |   |             | ($0.09    | )
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          
|                                   | Fully diluted                            |   |                       | ($0.36    | )                     |   |             | ($0.09    | )    |   |             | ($0.39    | ) |   |             | ($0.09    | )
|                                   |                                          |   |                       |           |                       |   |             |           |      |   |             |           |   |   |             |          

See accompanying notes to financial statements.

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CABLETEL COMMUNICATIONS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Canadian Funds)
(Unaudited)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |            |  
|----------------------------------- | -------------------------------------------------- | - | --------------------- | ---------- | --------------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                    |                                                    |   | For the Three Month   |            | For the Six Month    
|                                    |                                                    |   | Period Ended June 30, |            | Period Ended June 30,
|                                    |                                                    |   |                       |            |                      
|                                    |                                                    |   | 2003                  |            | 2002                  |   | 2003       |            | 2002
|                                    |                                                    |   |                       |            |                       |   |            |            |     
|OPERATING ACTIVITIES                |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|                                    | Loss for the period                                |   | $                     | (2,544,966 | )                     |   | $          | (674,154   | )    |   | $          | (2,792,371 | ) |   | $          | (613,203   | )
|                                    | Amortization                                       |   |                       | 119,463    |                       |   |            | 111,646    |      |   |            | 244,777    |   |   |            | 176,739    |  
|                                    | Amortization of prepaid refinancing
fees           |   |                       | 66,666     |                       |   |            |           |      |   |            | 133,333    |   |   |            |           |  
|                                    | Write down of long-lived assets                    |   |                       | 400,000    |                       |   |            |           |      |   |            | 400,000    |   |   |            |           |  
|                                    | Write off of goodwill                              |   |                       | 198,606    |                       |   |            |           |      |   |            | 198,606    |   |   |            |           |  
|                                    | Write off of other assets                          |   |                       |           |                       |   |            | 604,809    |      |   |            |           |   |   |            | 604,809    |  
|                                    | Loss on settlement of debt                         |   |                       |           |                       |   |            | 164,000    |      |   |            |           |   |   |            | 164,000    |  
|                                    | Loss on disposition of assets                      |   |                       |           |                       |   |            |           |      |   |            | 31,269     |   |   |            |           |  
|                                    | Imputed interest                                   |   |                       | (3,750     | )                     |   |            | (4,000     | )    |   |            | (7,500     | ) |   |            | (8,000     | )
|                                    | Change in accounts receivable                      |   |                       | 1,275,350  |                       |   |            | (4,594,006 | )    |   |            | 4,625,479  |   |   |            | (3,368,845 | )
|                                    | Change in inventory                                |   |                       | 1,026,284  |                       |   |            | 158,988    |      |   |            | 971,293    |   |   |            | 546,027    |  
|                                    | Change in prepaid expenses,
deposits and other     |   |                       | 818,257    |                       |   |            | (987,566   | )    |   |            | 1,158,057  |   |   |            | (995,191   | )
|                                    | Change in accounts payable
and accrued liabilities |   |                       | (1,396,052 | )                     |   |            | 2,697,207  |      |   |            | (1,831,212 | ) |   |            | 1,972,974  |  
|                                    | Change in income taxes recoverable                 |   |                       |           |                       |   |            | (45,211    | )    |   |            | 120,000    |   |   |            | (80,192    | )
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|                                    |                                                    |   | (40,142               | )          |                       |   | (2,568,287 | )          |      |   | 3,251,731  |            |   |   | (1,600,882 | )         
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|FINANCING ACTIVITIES                |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|                                    | Bank indebtedness incurred (repayment)             |   |                       | 395,693    |                       |   |            | 2,855,858  |      |   |            | (2,609,889 | ) |   |            | 1,914,551  |  
|                                    | Repayment of long-term debt                        |   |                       | (337,685   | )                     |   |            | (228,543   | )    |   |            | (767,019   | ) |   |            | (259,320   | )
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|                                    |                                                    |   | 58,008                |            |                       |   | 2,627,315  |            |      |   | (3,376,908 | )          |   |   | 1,655,231  |           
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|INVESTING ACTIVITIES                |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|                                    | Goodwill acquired                                  |   |                       | (30,017    | )                     |   |            |           |      |   |            | (36,990    | ) |   |            |           |  
|                                    | Disposition of (purchase of) equipment             |   |                       | 1,964      |                       |   |            | (31,471    | )    |   |            | 128,704    |   |   |            | (25,560    | )
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|                                    |                                                    |   | (28,053               | )          |                       |   | (31,471    | )          |      |   | 91,714     |            |   |   | (25,560    | )         
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|CHANGE IN CASH                      |                                                    |   | (10,187               | )          |                       |   | 27,557     |            |      |   | (33,463    | )          |   |   | 28,789     |           
|CASH, beginning of period           |                                                    |   | 39,893                |            |                       |   | 13,524     |            |      |   | 63,169     |            |   |   | 12,292     |           
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|CASH, end of period                 |                                                    | $ | 29,706                |            |                       | $ | 41,081     |            |      | $ | 29,706     |            |   | $ | 41,081     |           
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|SUPPLEMENTARY CASH FLOW INFORMATION |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|                                    | Interest paid                                      |   | $                     | 241,867    |                       |   | $          | 259,835    |      |   | $          | 493,751    |   |   | $          | 429,044    |  
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           
|                                    | Income taxes paid                                  |   | $                     |           |                       |   | $          |           |      |   | $          |           |   |   | $          |           |  
|                                    |                                                    |   |                       |            |                       |   |            |            |      |   |            |            |   |   |            |           

See accompanying notes to financial statements.

5



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##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|1. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                         
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada, which, except as
described in Note 14, conform, in all material respects, with the
accounting principles generally accepted in the United States.



| | (a) |  | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal
recurring adjustments) which are necessary to present fairly the
consolidated financial position as at June 30, 2003 and the
consolidated results of operations and the consolidated cash flows
for the three and six months ended June 30, 2003 and 2002.                                                                                                                    
|
| |     |  | While management believes that the disclosures presented are
adequate to make the information not misleading, it is suggested
that these consolidated financial statements be read in conjunction
with the consolidated financial statements and the notes included in
the Companys latest annual report on Form 10-K.                                                                                                                                                                                        
|
| |     |  | The interim financial statements follow the same accounting policies
and methods of their application as the most recent annual financial
statements. However, the interim financial statements do not
include all disclosures necessary to conform in all respects to the
requirements of Canadian generally accepted accounting principles
for annual financial statements.                                                                                                                                  
|
| | (b) |  | Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |     |  | The consolidated financial statements include the accounts of the
wholly-owned subsidiaries, Stirling (Israel) Ltd., and Stirling
Connectors, U.S.A., Inc., and as of November 1, 2002, Allied Wire
and Cable Ltd., (ALLIED) as a result of the Companys ability to
convert its convertible debenture into 100% ownership of all Allied
issued and outstanding common shares for a nominal consideration.
On May 9, 2003, the Company exercised its option to acquire all the
outstanding shares of Allied.
|
| |     |  | The consolidated financial statements include the accounts of the
Company after eliminations of inter-company transactions.                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (c) |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |     |  | Sales are recognized when legal title to the goods has been passed
to the customer, which generally occurs when products are shipped
from the Companys plant or warehouses, and collection is reasonably
assured.                                                                                                                                                                                                                                                                                             

6



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|2. |  | INVENTORY                                                                                                                                                                   
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Inventory is valued at the lower of cost (first-in, first-out) and net
realizable value. Cost includes appropriate elements of duty, freight,
material, labour and overhead.

|                |  |          |           |              |  |   |            | 
|--------------- |  | -------- | --------- | ------------ |  | - | ---------- | 
|                |  | June 30, |           | December 31,
|                |  | 2003     |           | 2002        
|                |  |          |           |             
|Raw Material    |  | $        | 246,144   |              |  | $ | 293,783    | 
|Work in process |  |          | 581,665   |              |  |   | 483,497    | 
|Finished goods  |  |          | 8,689,343 |              |  |   | 9,711,165  | 
|                |  |          |           |              |  |   |            | 
|                |  | $        | 9,517,152 |              |  | $ | 10,488,445 | 
|                |  |          |           |              |  |   |            | 



|3. |  | PROPERTY, PLANT AND EQUIPMENT
|-- |  | -----------------------------

|                       |  |      |           |              |  |               |           |      |  |              |           |     |  |  |           |                   |  |  |           |  |  |  |           | 
|---------------------- |  | ---- | --------- | ------------ |  | ------------- | --------- | ---- |  | ------------ | --------- | --- |  |  | --------- | ----------------- |  |  | --------- |  |  |  | --------- | 
|                       |  |      |           |              |  | June 30, 2003 |           |      |  |              |           |     |  |  |           | December 31, 2002 |  |  |           | 
|                       |  |      |           |              |  | Accumulated   |           |      |  |              |           |     |  |  |           | Accumulated       |  |  |           | 
|                       |  | Cost |           | Amortization |  | Net           |           | Cost |  | Amortization |           | Net
|                       |  |      |           |              |  |               |           |      |  |              |           |    
|                       |  | $    |           | $            |  | $             |           | $    |  | $            |           | $  
|Leasehold improvements |  |      | 711,090   |              |  |               | 325,538   |      |  |              | 385,552   |     |  |  | 711,090   |                   |  |  | 296,093   |  |  |  | 414,997   | 
|Equipment              |  |      | 3,576,121 |              |  |               | 2,551,083 |      |  |              | 1,425,038 |     |  |  | 4,136,094 |                   |  |  | 2,353,005 |  |  |  | 1,783,089 | 
|                       |  |      |           |              |  |               |           |      |  |              |           |     |  |  |           |                   |  |  |           |  |  |  |           | 
|                       |  |      | 4,287,211 |              |  |               | 2,876,621 |      |  |              | 1,410,590 |     |  |  | 4,847,184 |                   |  |  | 2,649,098 |  |  |  | 2,198,086 | 
|                       |  |      |           |              |  |               |           |      |  |              |           |     |  |  |           |                   |  |  |           |  |  |  |           | 



| |  | For the three and six months ended June 30, 2002, the Company did not
amortize equipment with a carrying amount of $837,142 relating to certain
manufacturing equipment during a period the equipment was not in use. The
Company assessed future cash flow based on the Companys expected plan of
operations and it was determined there was no impairment in value. The
Company had re-utilized all these assets in its manufacturing operations
during the year ended December 31, 2002.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | At June 30, 2003, the Company re-assessed the carrying value of its
manufacturing equipment and determined that there was an impairment in value and
accordingly, the Company took a write down amounting to $400,000 based on
the net realizable value of the assets.                                                                                                                                                                                                                      

7



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|4. |  | BANK INDEBTEDNESS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On May 16, 2002, Cabletel entered into a Revolving Credit Facility
Agreement with LaSalle Business Credit, a division of ABN AMBRO BANK N.V.,
Canada Branch (LaSalle) for a three year committed fifteen million
Canadian dollars (CDN$15,000,000) facility, or its United States dollar
equivalent. Canadian Dollar borrowings under the Revolving Credit
Facility bears interest at the LaSalle Prime Reference Rate plus two
percent (2.0%). United States dollar borrowings under the Revolving
Credit Facility bears interest at the LaSalle U.S. Base Reference Rate
plus two percent (2.0%). The facilities are secured by a first priority
security position on all personal property (including without limitation
accounts, contract rights, inventory, machinery and equipment, and general
intangibles, existing and future, second position in the case of certain
machinery and equipment securing a prior loan by the Business Development
Bank of Canada, and general intangibles), existing and future.
|  
|   |  | The facility contains certain customary covenants. As of June 30, 2003,
as a result of a variation from the required minimum adjusted net worth,
interest coverage ratio and debt service ratio, the Company had a
technical violation of the applicable covenants. The Company is working
with its lender to resolve the matter and expects to receive either a
waiver or amendment to the agreement shortly. There can be no assurance
that the Company will be successful in obtaining either a waiver or
amendment. In the event that the Company is unable to obtain such waiver
or amendment it could adversely affect the Company.                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | As of November 1, 2002, the Company began consolidating the results of
Allied, as a result of the Companys ability to convert its convertible
debenture into 100% ownership of all issued and outstanding common shares
of Allied for a nominal consideration. Subsequently, on May 9, 2003,
Cabletel exercised its option and acquired all the outstanding shares of
Allied. Allied is currently in negotiations with its senior bank lender
with regards to an extension of its senior bank facility beyond its
current maturity date. If Allied is unable to obtain such an extension,
this could adversely affect the consolidated results of the Company.                                                                                                                                                                                                                                                                                                                                                          
|  
|5. |  | LONG-TERM DEBT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|      |  |                        |  |          |           |              |  |   |           | 
|----- |  | ---------------------- |  | -------- | --------- | ------------ |  | - | --------- | 
|      |  |                        |  | June 30, |           | December 31,
|      |  |                        |  | 2003     |           | 2002        
|      |  |                        |  |          |           |             
|(i)   |  | Term loanLeaseholds   |  | $        | 308,319   |              |  | $ | 324,337   | 
|(ii)  |  | Term loanEquipment    |  |          | 365,800   |              |  |   | 401,200   | 
|(iii) |  | Term loanNote         |  |          | 1,780,508 |              |  |   | 2,496,109 | 
|      |  |                        |  |          |           |              |  |   |           | 
|      |  |                        |  |          | 2,454,627 |              |  |   | 3,221,646 | 
|      |  | Less:  Current portion |  |          | 1,956,588 |              |  |   | 2,067,558 | 
|      |  |                        |  |          |           |              |  |   |           | 
|      |  |                        |  | $        | 498,039   |              |  | $ | 1,154,088 | 
|      |  |                        |  |          |           |              |  |   |           | 

8



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|5. |  | LONG-TERM DEBT(continued)
|-- |  | -------------------------



| | (i)   |  | Long-term debt bears interest at 10% per annum, payable in
equal monthly installments of $5,264 (principal and interest) for
ten years until February 14, 2010. This debt was obtained for the
improvements of the building covered by a lease agreement and is
payable to the landlord, together with the monthly lease payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | Long-term debt bears interest at Business Development Bank of
Canada (BDC) prime plus 0.75% per annum (September 30, 2002  7.25%
per annum; December 31, 2001  6.75% per annum) payable monthly over
a period of 5 years. This debt was provided by the BDC to purchase
production machinery used in the manufacturing of connectors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |       |  | Contemporaneously with the Company entering into the new Revolving
Credit Facility, the Company renegotiated credit terms with a major
supplier. That renegotiation included the conversion of US $2.2
million in outstanding payables owed by the Company into a senior
subordinated promissory note, which resulted in the Company taking a
charge of $164,000 on loss of settlement of debt. The senior
subordinated promissory note is in the principal amount of US $2.2
million, bears interest at the rate of 12% per annum and is
repayable in agreed upon monthly installments of between US $60,000
and US $120,000 over the next two years. In connection with that
renegotiation, the Company also issued to the supplier a Warrant to
acquire up to 200,000 shares of the Companys common stock at an
exercise price of Cdn $1.64 per share up to and including May 31,
2007. The fair value of the Warrant was estimated on the date of
the grant using the fair value recognition method, with the
following assumptions: risk free interest rate of 5%, dividend yield
of 0%, theoretical volatility of .90 and the expected life of 2
years.
|
| | (iii) |  | The Company is in the process of renegotiating the payment
terms of its US $2.2 million subordinated promissory note. As a
result, it has obtained the consent of the payee to pay half of each
of the full US $120,000 installments due under the note on each of
May 31, June 30, and July 31, 2003. In connection with that
restructuring, Cabletel has been in discussions with the payee of the
note regarding a restructuring which would reduce the monthly payment
below the required US $120,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |       |  | Although discussions with the payee have commenced, to date Cabletel
and the payee have not agreed upon the terms of a restructuring.
Unless an agreement is reached by August 15, 2003, Cabletel will be
required to pay the full US $120,000 installment due on August 31,
2003, plus the amount of Cabletels total underpayment of US
$180,000 with respect to May                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

9



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|5. |  | LONG-TERM DEBT(continued)
|-- |  | -------------------------



| |  |  | 31, June 30, and July 31, 2003 installments. Unless an agreement is
reached, Cabletel does not expect to be in a position to make those
payments. If Cabletel is unable or otherwise fails to make those
payments in full it would constitute a default of the terms of the
note, which is unsecured and subordinated to the rights of the
senior bank lenders under Cabletels senior credit facility. If no
agreement is reached, Cabletel may not be in a position to make all
of the required payments, an event that could permit the payee to
call an event of default under the note and have a material adverse
impact on Cabletel and its business.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | CAPITAL STOCK
|-- |  | -------------

|                           |  |        |           |        |  |   |            | 
|-------------------------- |  | ------ | --------- | ------ |  | - | ---------- | 
|                           |  | Number |           | Amount
|                           |  |        |           |       
|Balance, December 31, 2002 |  |        | 7,167,612 |        |  | $ | 16,136,761 | 
|                           |  |        |           |        |  |   |            | 
|Balance, June 30, 2003     |  |        | 7,167,612 |        |  | $ | 16,136,761 | 
|                           |  |        |           |        |  |   |            | 



| |  | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Under the terms of a stock option plan approved by the shareholders in
May, 1994 and amended in November of 1999, and March of 2002, the Company
is authorized to grant directors, officers, employees and others options
to purchase common shares at prices based on the market price of shares as
determined on the date of grant. At June 30, 2003, 515,500 options remain
available to be granted. Stock options become exercisable at dates
determined by the Compensation Committee.
|
| |  | Common shares have been reserved for stock options on the following basis:                                                                                                                                                                                                                                                                                                                                                                                                                 

|                             |  |        |           |       |  |         |             |          |  |  |      | 
|---------------------------- |  | ------ | --------- | ----- |  | ------- | ----------- | -------- |  |  | ---- | 
|                             |  |        |           |       |  | Option  |             | Weighted
|                             |  | Shares |           | Price |  | Average
|                             |  |        |           |       |  |        
|                             |  |        |           |       |  | $       |             | $       
|Outstanding and Exercisable  |  |        |           |       |  |         |             |          |  |  |      | 
|Balance at December 31, 2002 |  |        | 1,444,000 |       |  |         | 1.53 - 9.28 |          |  |  | 3.88 | 
|                             |  |        |           |       |  |         |             |          |  |  |      | 
|Cancelled                    |  |        | 9,500     |       |  |         | 3.24 - 4.44 |          |  |  | 4.10 | 
|                             |  |        |           |       |  |         |             |          |  |  |      | 
|Balance at June 30, 2003     |  |        | 1,434,500 |       |  |         | 1.53 - 9.28 |          |  |  | 3.87 | 
|                             |  |        |           |       |  |         |             |          |  |  |      | 

10



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|6. |  | CAPITAL STOCK(continued)                                                                                                                            
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In connection with the settlement of outstanding accounts payable (Note 5iii),
common shares have been reserved for warrants on the following basis:

|                             |  |        |         |       |  |          |      |          |  |  |      | 
|---------------------------- |  | ------ | ------- | ----- |  | -------- | ---- | -------- |  |  | ---- | 
|                             |  |        |         |       |  | Exercise |      | Weighted
|                             |  | Shares |         | Price |  | Average 
|                             |  |        |         |       |  |         
|                             |  |        |         |       |  | $        |      | $       
|Outstanding and Exercisable  |  |        |         |       |  |          |      |          |  |  |      | 
|Balance at December 31, 2002 |  |        | 200,000 |       |  |          | 1.64 |          |  |  | 1.64 | 
|                             |  |        |         |       |  |          |      |          |  |  |      | 
|Balance at June 30, 2003     |  |        | 200,000 |       |  |          | 1.64 |          |  |  | 1.64 | 
|                             |  |        |         |       |  |          |      |          |  |  |      | 



| |  | In December 2001, the CICA issued Handbook Section 3870 Stock-Based
Compensation and Other Stock-Based Payments. Effective for the Companys
fiscal year beginning January 1, 2002, the new section requires the use of a
fair-value based approach of accounting for certain specified stock-based
awards. For all other employee stock-based awards, the section encourages but
does not require that a fair-value based approach be used. Had compensation
expense for the Companys stock-based compensation plan been determined based
on the fair value at the grant dates for awards under the Plan consistent with
the method under CICA Handbook Section 3870, the Companys net income and
earnings per share would have been reported as the pro-forma amounts indicated
in the table below.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The fair value of each option grant was estimated on the date of the grant
using the fair value recognition method, with the following assumptions: risk
free interest rate of 5%; dividend yield of 0%; theoretical volatility
assumption of .90; three years vesting provision on certain options granted in
2002 and the expected lives of options of 3 years.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | As Reported                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                            |                         |   |             |        |             |   |             |        |             |   |            |        |   |   |          |        |  
|--------------------------- | ----------------------- | - | ----------- | ------ | ----------- | - | ----------- | ------ | ----------- | - | ---------- | ------ | - | - | -------- | ------ | -
|                            |                         |   | 3 months    |        | 3 months    |   | 6 months    |        | 6 months   
|                            |                         |   | June 30,    |        | June 30,    |   | June 30,    |        | June 30,   
|                            |                         |   | 2003        |        | 2002        |   | 2003        |        | 2002       
|                            |                         |   | As Reported |        | As Reported |   | As Reported |        | As Reported
|                            |                         |   |             |        |             |   |             |        |            
|Net income (loss)           |                         | $ | (2,544,966  | )      |             | $ | (674,154    | )      |             | $ | (2,792,371 | )      |   | $ | (613,203 | )     
|Net income (loss) per share |                         |   |             |        |             |   |             |        |             |   |            |        |   |   |          |       
|                            | Basic and Fully Diluted |   |             | ($0.36 | )           |   |             | ($0.09 | )           |   |            | ($0.39 | ) |   |          | ($0.09 | )

11



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|6. |  | CAPITAL STOCK(continued)
|-- |  | ------------------------
|  
|   |  | Pro-Forma               

|                                                                  |                         |   |            |        |           |   |           |        |           |   |            |        |   |   |            |        |  
|----------------------------------------------------------------- | ----------------------- | - | ---------- | ------ | --------- | - | --------- | ------ | --------- | - | ---------- | ------ | - | - | ---------- | ------ | -
|                                                                  |                         |   | 3 months   |        | 3 months  |   | 6 months  |        | 6 months 
|                                                                  |                         |   | June 30,   |        | June 30,  |   | June 30,  |        | June 30, 
|                                                                  |                         |   | 2003       |        | 2002      |   | 2003      |        | 2002     
|                                                                  |                         |   | Pro-Forma  |        | Pro-Forma |   | Pro-Forma |        | Pro-Forma
|                                                                  |                         |   |            |        |           |   |           |        |          
|Net loss                                                          |                         | $ | (2,544,966 | )      |           | $ | (674,154  | )      |           | $ | (2,792,371 | )      |   | $ | (1,050,820 | )     
|Net earnings (loss) per share                                     |                         |   |            |        |           |   |           |        |           |   |            |        |   |   |            |       
|                                                                  | Basic and Fully Diluted |   |            | ($0.36 | )         |   |           | ($0.09 | )         |   |            | ($0.39 | ) |   |            | ($0.15 | )
|Weighted average fair value of
options granted during
this period |                         |   |           |        |           |   |          |        |           |   |            |        |   | $ | 1.25       |       



|7. |  | EARNINGS PER SHARE
|-- |  | ------------------



| | (a) |  | Basic Earnings per Share                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The weighted average number of shares outstanding amounted to
7,167,612 for the three and six months ended June 30, 2003 and
7,167,612 for the three and six months ended June 30, 2002.                                                                                                                                                                                                                                                                               
|
| | (b) |  | Fully Diluted Earnings per Share                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |     |  | The Company adopted the recommendations of CICA Handbook Section
3500, Earnings per Share (EPS), effective January 1, 2001. The
revised section requires the presentation of both basic and diluted
EPS on the face of the income statement regardless of the
materiality of difference between them and requires the use of the
treasury stock method to compute the dilutive effect of options as
opposed to the former imputed earnings approach.                   
|
| |     |  | For the three and six months ended June 30, 2003 the exercise of
outstanding stock options do not have a dilutive effect on earnings
(loss) per share. All the options as indicated in Note 6,
outstanding during the three and six months ended June 30, 2003
being 1,434,500 were not included in the calculation of diluted
earnings per share as to do so would have been anti-dilutive. Also
not included in the calculation of diluted earnings per share for
the

12



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|7. |  | EARNINGS PER SHARE(continued)
|-- |  | -----------------------------



| |  |  | three and six months ended June 30, 2003 were 200,000 warrants as to
do so would have been anti-dilutive. For the three and six months
ended June 30, 2003 the weighted average number of shares for
diluted earnings per share was the same as that for basic earnings
per share.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The following table sets forth the computation of basic and diluted
earnings per share:
| |  | ---------------------------------------------------------------------------------------

|                                                                                        |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|--------------------------------------------------------------------------------------- |  | -------------------- | ---------- | ------------------ |  | ---- | --------- | ---- |  | - | ---------- | - |  | - | --------- | -
|                                                                                        |  | For the Three Months |            | For the Six Months
|                                                                                        |  | Ended June 30,       |            | Ended June 30,    
|                                                                                        |  |                      |            |                   
|                                                                                        |  | 2003                 |            | 2002               |  | 2003 |           | 2002
|                                                                                        |  |                      |            |                    |  |      |           |     
|Numerator:                                                                              |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|Net loss and numerator for
basic loss and for diluted
loss per share                    |  | $                    | (2,544,966 | )                  |  | $    | (674,154  | )    |  | $ | (2,792,371 | ) |  | $ | (613,203  | )
|Denominator:                                                                            |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|Weighted-average shares for basic
loss per share                                        |  |                      | 7,167,612  |                    |  |      | 7,167,612 |      |  |   | 7,167,612  |   |  |   | 7,167,612 |  
|                                                                                        |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|Effect of dilutive securities:                                                          |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|Employee stock options                                                                  |  |                      |           |                    |  |      |          |      |  |   |           |   |  |   |          |  
|Warrants                                                                                |  |                      |           |                    |  |      |          |      |  |   |           |   |  |   |          |  
|                                                                                        |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|Dilutive potential of common shares                                                     |  |                      |           |                    |  |      |          |      |  |   |           |   |  |   |          |  
|                                                                                        |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|Adjusted weighted-average
shares and assumed conversions
for diluted earnings per share |  |                      | 7,167,612  |                    |  |      | 7,167,612 |      |  |   | 7,167,612  |   |  |   | 7,167,612 |  
|                                                                                        |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|Basic loss per share                                                                    |  |                      | ($0.36     | )                  |  |      | ($0.09    | )    |  |   | ($0.39     | ) |  |   | ($0.09    | )
|                                                                                        |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  
|Diluted loss per share                                                                  |  |                      | ($0.36     | )                  |  |      | ($0.09    | )    |  |   | ($0.39     | ) |  |   | ($0.09    | )
|                                                                                        |  |                      |            |                    |  |      |           |      |  |   |            |   |  |   |           |  



|8. |  | DEFERRED REFINANCING FEES                                                                                                                                                                                                                  
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Deferred refinancing fees relate to costs incurred in connection with the
Companys refinancing of its long-term bank debt with ABN AMRO. (See note
4) Deferred refinancing fees are amortized over three years being the life
of the loan.

13



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|9. |  | RELATED PARTY TRANSACTIONS
|-- |  | --------------------------



| | (i)  |  | On December 12, 2000, the Companys Board of Directors approved
two executive loan agreements (i) to the President of the Company in
the amount of $150,000 and (ii) to the Chief Financial Officer of the
Company in the amount of $100,000. The loans mature on December 19,
2003, and are unsecured and interest-free. The Company carries these
loans at estimated fair value using a discount rate of 7% per annum.
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | For the three months ended June 30, 2003 and 2002 the Company
paid to the Sullivan Group, an entity controlled by the President of
the Company, $13,950 and $13,950 respectively and for the six months
ended June 30, 2003 and 2002 $27,900 and $27,900 respectively relating
to charges in connection with Mr. Wallings compensation.                                                                                



|10. |  | COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company is party to legal actions arising in the ordinary course
of its business. In managements opinion, the Company has adequate
insurance coverage and/or legal defenses with respect to any of these
actions and does not believe that they will materially affect the
Companys consolidated financial position or results of operations.                                                                                                                                                                                                                                                                                                                 
|   
|11. |  | SPECIAL CHARGES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | For the three and six months ended June 30, 2003, Cabletel recorded
special charges of $280,000 related to termination expenses of
approximately 25% of Cabletels workforce. As of June 30, 2003, the
unpaid balance of these charges included in accrued liabilities was
$280,000. For the three and six months ended June 30, 2003 the Company
had not paid out any funds relating to the special charge.                                                                                                                                                                                                                                                        
|   
|12. |  | ACQUISITION OF ALLIED WIRE AND CABLE LTD.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | On November 1, 2002, the Company entered into a transaction with Allied
Wire and Cable Ltd., and certain related companies pursuant to which
Cabletel has been granted an option to acquire all of the capital stock of
Allied for a nominal consideration. As part of the transaction, Cabletel
agreed to provide an additional $100,000 in inventory on extended terms
and advance $50,000 in cash to Allied. As previously reported, the
Companys second quarter ended June 30, 2002 results included a write-off
related to Allied. The company took that write-off in connection with the
termination of its previously announced agreement to acquire Allied.

14



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|12. |  | ACQUISITION OF ALLIED WIRE AND CABLE LTD.(continued)                                                                                                                                                                                                                                                                                          
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | As set out in note 1(b), Allied has been accounted for by the purchase
method and as such results of operations for this business have been
included for the period beginning November 1, 2002. To date approximately
$198,606 of goodwill has been recorded in connection with the transaction.
The acquisition was accounted for as follows:
|   
|    |  | Net assets acquired                                                                                                                                                                                                                                                                                                                           

|                     |  |   |            |  
|-------------------- |  | - | ---------- | -
|Total current assets |  | $ | 986,504    |  
|Total liabilities    |  |   | (1,303,071 | )
|Other                |  |   | 217,575    |  
|Acquisition costs    |  |   | (99,614    | )
|                     |  |   |            |  
|                     |  |   | (198,606   | )
|Goodwill             |  |   | 198,606    |  
|                     |  |   |            |  
|                     |  | $ | 0          |  
|                     |  |   |            |  
|Consideration given  |  | $ | 0          |  
|                     |  |   |            |  



|    |  | During the second quarter ending June 30, 2003, the Company assessed the
carrying value of the goodwill and determined that it had been impaired
due to Allieds poor performance and continued uncertainty in the
telecommunications industry, as well as uncertainty as to whether or not
Allied will be successful in obtaining an extension of its senior bank
facility beyond its current maturity date. As a result the Company has
chosen to write-off the total carrying amount of $198,606.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|13. |  | SEGMENTED INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | The Company operates in three
separate segments  distribution of
broadband communications equipment, distribution of technology equipment
and manufacturing of coaxial cable connectors.                                                                                                                                                                                                                                                                                                           
|   
|    |  | It should be noted that industry segment information may be of limited
usefulness in comparing an industry segment of the Company with a similar
industry segment of another enterprise.                                                                                                                                                                                                                                                                                                            
|   
|    |  | Selected information by operating segment is summarized below for the
three and six months ended June 30, 2003 and 2002.                                                                                                                                                                                                                                                                                                                                                                            

15



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|13. |  | SEGMENTED INFORMATION(continued)
|--- |  | --------------------------------
|   
|    |  | Summary of Business Segment     

|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |         |  
|------------------------------------------------- | ---------------- | - | -------------------- | ------- | ------------------ | - | ---------- | ------- | ---- | - | ---------- | -------- | - | - | ---------- | ------- | -
|                                                  |                  |   | For the Three Months |         | For the Six Months
|                                                  |                  |   | Ended June 30,       |         | Ended June 30,    
|                                                  |                  |   |                      |         |                   
|                                                  |                  |   | 2003                 |         | 2002               |   | 2003       |         | 2002
|                                                  |                  |   |                      |         |                    |   |            |         |     
|Net Revenue                                       |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Distribution                                      |                  | $ | 6,161,789            |         |                    | $ | 12,906,548 |         |      | $ | 13,997,082 |          |   | $ | 23,844,103 |        
|Manufacturing                                     |                  |   | 2,262,878            |         |                    |   | 1,647,267  |         |      |   | 4,778,705  |          |   |   | 3,402,490  |        
|Technology                                        |                  |   | 1,144,773            |         |                    |   | 538,542    |         |      |   | 2,348,565  |          |   |   | 1,249,859  |        
|Less: Inter-company eliminations                  |                  |   | (792,470             | )       |                    |   | (131,978   | )       |      |   | (1,229,035 | )        |   |   | (352,387   | )      
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Total Net Revenue                                 |                  | $ | 8,776,970            |         |                    | $ | 14,960,379 |         |      | $ | 19,895,317 |          |   | $ | 28,144,065 |        
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Gross Profit                                      |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Distribution                                      |                  | $ | 161,503              |         |                    | $ | 2,087,616  |         |      | $ | 1,447,963  |          |   | $ | 3,923,037  |        
|Manufacturing                                     |                  |   | 449,747              |         |                    |   | 515,701    |         |      |   | 993,619    |          |   |   | 1,026,714  |        
|Technology                                        |                  |   | 92,210               |         |                    |   | 59,675     |         |      |   | 260,572    |          |   |   | 161,255    |        
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Total Gross Profit                                |                  | $ | 703,460              |         |                    | $ | 2,662,992  |         |      | $ | 2,702,154  |          |   | $ | 5,111,006  |        
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Selling, general and administrative expenses      |                  |   | (2,074,136           | )       |                    |   | (2,248,282 | )       |      |   | (3,998,155 | )        |   |   | (4,396,051 | )      
|Special charge                                    |                  |   | (280,000             | )       |                    |   |           |         |      |   | (280,000   | )        |   |   |           |        
|Amortization                                      |                  |   | (44,817              | )       |                    |   | (55,220    | )       |      |   | (95,223    | )        |   |   | (120,305   | )      
|Interest expense  other                          |                  |   | (164,051             | )       |                    |   | (179,261   | )       |      |   | (324,857   | )        |   |   | (326,785   | )      
|                                                  |  long-term debt |   |                      | (77,816 | )                  |   |            | (76,574 | )    |   |            | (168,894 | ) |   |            | (94,259 | )
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|                                                  |                  |   | (2,640,820           | )       |                    |   | (2,559,337 | )       |      |   | (4,867,129 | )        |   |   | (4,937,400 | )      
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Consolidated Earnings (Loss) Before
the Following |                  |   | (1,937,360           | )       |                    |   | 103,655    |         |      |   | (2,164,975 | )        |   |   | 173,606    |        
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Write down of long lived assets                   |                  |   | (400,000             | )       |                    |   |           |         |      |   | (400,000   | )        |   |   |           |        
|Write off of goodwill                             |                  |   | (198,606             | )       |                    |   |           |         |      |   | (198,606   | )        |   |   |           |        
|Loss on disposal of assets                        |                  |   |                     |         |                    |   |           |         |      |   | (31,269    | )        |   |   |           |        
|Write-off of other assets                         |                  |   |                     |         |                    |   | (604,809   | )       |      |   |           |          |   |   | (604,809   | )      
|Loss on settlement of debt                        |                  |   |                     |         |                    |   | (164,000   | )       |      |   |           |          |   |   | (164,000   | )      
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|                                                  |                  |   | (598,606             | )       |                    |   | (768,809   | )       |      |   | (629,875   | )        |   |   | (768,809   | )      
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        
|Loss Before Income Taxes                          |                  | $ | (2,535,966           | )       |                    | $ | (665,154   | )       |      | $ | (2,794,850 | )        |   | $ | (595,203   | )      
|                                                  |                  |   |                      |         |                    |   |            |         |      |   |            |          |   |   |            |        

16



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|13. |  | SEGMENTED INFORMATION(continued)
|--- |  | --------------------------------
|   
|    |  | Identifiable Assets:            

|                            |  |          |            |              |  |   |            | 
|--------------------------- |  | -------- | ---------- | ------------ |  | - | ---------- | 
|                            |  | June 30, |            | December 31,
|                            |  | 2003     |            | 2002        
|                            |  |          |            |             
|Distribution and Technology |  | $        | 13,056,224 |              |  | $ | 18,704,003 | 
|Manufacturing               |  |          | 8,573,309  |              |  |   | 8,375,845  | 
|Other unallocated assets    |  |          |           |              |  |   | 154,981    | 
|                            |  |          |            |              |  |   |            | 
|Total Identifiable Assets   |  | $        | 21,629,533 |              |  | $ | 27,234,829 | 
|                            |  |          |            |              |  |   |            | 



| |  | Expenditures on Property,
Plant and Equipment
| |  | ---------------------------------------------

|                            |  |                      |        |                    |  |      |        |      |  |   |          |   |  |   |        |  
|--------------------------- |  | -------------------- | ------ | ------------------ |  | ---- | ------ | ---- |  | - | -------- | - |  | - | ------ | -
|                            |  | For the Three Months |        | For the Six Months
|                            |  | Ended June 30,       |        | Ended June 30,    
|                            |  |                      |        |                   
|                            |  | 2003                 |        | 2002               |  | 2003 |        | 2002
|                            |  |                      |        |                    |  |      |        |     
|Distribution and Technology |  | $                    |       |                    |  | $    | 32,744 |      |  | $ | (124,948 | ) |  | $ | 34,809 |  
|Manufacturing               |  |                      | (1,964 | )                  |  |      | (1,273 | )    |  |   | (3,756   | ) |  |   | (9,249 | )
|                            |  |                      |        |                    |  |      |        |      |  |   |          |   |  |   |        |  
|Total Expenditures          |  | $                    | (1,964 | )                  |  | $    | 31,471 |      |  | $ | (128,704 | ) |  | $ | 25,560 |  
|                            |  |                      |        |                    |  |      |        |      |  |   |          |   |  |   |        |  



| |  | Amortization
(Includes amortization in cost of sales, product development costs and
deferred refinancing fees.)
| |  | ---------------------------------------------------------------------------------------------------------------

|                            |  |                      |         |                    |  |      |         |      |  |   |         |  |  |   |         | 
|--------------------------- |  | -------------------- | ------- | ------------------ |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                            |  | For the Three Months |         | For the Six Months
|                            |  | Ended June 30,       |         | Ended June 30,    
|                            |  |                      |         |                   
|                            |  | 2003                 |         | 2002               |  | 2003 |         | 2002
|                            |  |                      |         |                    |  |      |         |     
|Distribution and Technology |  | $                    | 42,168  |                    |  | $    | 87,094  |      |  | $ | 90,133  |  |  | $ | 140,399 | 
|Manufacturing               |  |                      | 77,295  |                    |  |      | 24,552  |      |  |   | 154,977 |  |  |   | 36,340  | 
|Deferred refinancing fees   |  |                      | 66,666  |                    |  |      |        |      |  |   | 133,000 |  |  |   |        | 
|                            |  |                      |         |                    |  |      |         |      |  |   |         |  |  |   |         | 
|Total Amortization          |  | $                    | 186,129 |                    |  | $    | 111,646 |      |  | $ | 378,110 |  |  | $ | 176,739 | 
|                            |  |                      |         |                    |  |      |         |      |  |   |         |  |  |   |         | 



| |  | Summary by Geographical Area                                                
| |  | ----------------------------------------------------------------------------
|
| |  | Net Revenue
(Revenues are attributed based on the location of the customer.)

|                  |  |                      |           |                     |  |      |            |      |  |   |            |  |  |   |            | 
|----------------- |  | -------------------- | --------- | ------------------- |  | ---- | ---------- | ---- |  | - | ---------- |  |  | - | ---------- | 
|                  |  | For the Three Months |           | For the Six Months 
|                  |  | Ended June 30,       |           | Ended September 30,
|                  |  |                      |           |                    
|                  |  | 2003                 |           | 2002                |  | 2003 |            | 2002
|                  |  |                      |           |                     |  |      |            |     
|Canada            |  | $                    | 7,306,562 |                     |  | $    | 13,445,080 |      |  | $ | 16,345,647 |  |  | $ | 25,093,962 | 
|United States     |  |                      | 1,263,226 |                     |  |      | 1,497,079  |      |  |   | 3,095,354  |  |  |   | 2,761,423  | 
|Other             |  |                      | 207,182   |                     |  |      | 18,220     |      |  |   | 454,316    |  |  |   | 288,680    | 
|                  |  |                      |           |                     |  |      |            |      |  |   |            |  |  |   |            | 
|Total Net Revenue |  | $                    | 8,776,970 |                     |  | $    | 14,960,379 |      |  | $ | 19,895,317 |  |  | $ | 28,144,065 | 
|                  |  |                      |           |                     |  |      |            |      |  |   |            |  |  |   |            | 

17



---



##### 



CABLETEL COMMUNICATIONS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|13. |  | SEGMENTED INFORMATION(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Sales Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | Distribution                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | Sales to a customer within the Distribution segment for the three months
ended June 30, 2003 amounted to approximately $1,201,314 or 14% of total
revenue. Sales to this customer for the six months ended June 30, 2003
amounted to approximately $2,497,845 or 13% of total revenue. At June 30,
2003 this customer accounted for approximately 29% of total Cabletel
accounts receivable. The customers account was current as per the terms
and conditions of sale. The conditions of sale to this particular
customer include payment terms of 180 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | Sales to another customer within the Distribution segment for the three
months ended June 30, 2003 amounted to approximately $1,355,770 or 15% of
total revenue. Sales to this customer for the six months ended June 30,
2003 amounted to approximately $4,804,068 or 24% of total revenue. At
June 30, 2003 this customer accounted for approximately 10% of total
Cabletel accounts receivable. The customers account was current as per
the terms and conditions of sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | Manufacturing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | Sales to a customer within the Manufacturing segment for the three months
ended June 30, 2003 amounted to approximately $838,684 or 37% of the
Manufacturing segments total sales or approximately 10% of the Companys
total consolidated sales. For the six months ended June 30, 2003, sales
to this customer within the Manufacturing segment amounted to
approximately $2,461,493 or 52% of the Manufacturing segments total sales
or approximately 12% of the Companys total consolidated sales. At June
30, 2003 this customer accounted for approximately 15% of the Companys
total consolidated accounts receivable. At June 30, 2003, the customers
account was not current as per the terms and conditions of sale.
Subsequent to June 30, the customer paid down a portion of its past due
account. At August 5, 2003 approximately $210,000 remained beyond the
terms and conditions of sale. The Company believes the total amount owing
by this customer is collectible. Approximately $350,000 of this
receivable is insured through Export Development Canada.

18



---



##### 



CABLETEL COMMUNICATIONS CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|14. |  | UNITED STATES ACCOUNTING PRINCIPLES                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The following table reconciles the net earnings (loss) as reported on the
statements of operations and deficit prepared in accordance with Canadian
GAAP to the net income that would have been reported had the financial
statements been prepared in accordance with U.S. GAAP.



| | (i)  |  | Under Canadian GAAP costs classified as development
costs are charged in the income statement unless they meet
certain criteria; in which case, the costs must be deferred and
amortized. Under U.S. GAAP all costs classified as either
research or development costs are charged in the income
statement as incurred.
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | Due to the fact that the Company did not have legal
ownership of the common shares of Allied, until May 9, 2003,
U.S. GAAP does not allow consolidation of Allied results of
operations prior to that date.                                                                                                            



| |  | Reconciliation of Net Earnings From Canadian GAAP to United States GAAP
| |  | -----------------------------------------------------------------------

|                                                                     |  |                      |            |                    |  |      |          |      |  |   |            |   |  |   |          |  
|-------------------------------------------------------------------- |  | -------------------- | ---------- | ------------------ |  | ---- | -------- | ---- |  | - | ---------- | - |  | - | -------- | -
|                                                                     |  | For the Three Months |            | For the Six Months
|                                                                     |  | Ended June 30,       |            | Ended June 30,    
|                                                                     |  |                      |            |                   
|                                                                     |  | 2003                 |            | 2002               |  | 2003 |          | 2002
|                                                                     |  |                      |            |                    |  |      |          |     
|Net loss in accordance with
Canadian GAAP                            |  | $                    | (2,544,966 | )                  |  | $    | (674,154 | )    |  | $ | (2,792,371 | ) |  | $ | (613,203 | )
|Allied net loss                                                      |  |                      | (183,316   | )                  |  |      |         |      |  |   |           |   |  |   |         |  
|Reduction in amortization
of development costs (net
of income taxes) |  |                      | 4,658      |                    |  |      | 4,658    |      |  |   | 9,316      |   |  |   | 9,316    |  
|                                                                     |  |                      |            |                    |  |      |          |      |  |   |            |   |  |   |          |  
|Net loss in accordance
with U.S. GAAP                                |  | $                    | (2,723,624 | )                  |  | $    | (669,496 | )    |  | $ | (2,783,055 | ) |  | $ | (603,887 | )
|                                                                     |  |                      |            |                    |  |      |          |      |  |   |            |   |  |   |          |  



| |  | Loss on settlement of debt would be reported as an extraordinary item for
U.S. GAAP.
| |  | ------------------------------------------------------------------------------------

19



---



##### 



CABLETEL COMMUNICATIONS CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|14. |  | UNITED STATES ACCOUNTING PRINCIPLES(continued)                          
|--- |  | ------------------------------------------------------------------------
|   
|    |  | Balance Sheet Presentation Comparing Canadian GAAP to United States GAAP

|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |            | 
|----------------------------- | ------------------------------------ | - | ------------- | --------- | ----------------- | - | ----------- | --------- | ------- | - | ----------- | ---------- |  | - | ----------- | ---------- | 
|                              |                                      |   | June 30, 2003 |           | December 31, 2002
|                              |                                      |   |               |           |                  
|                              |                                      |   | CDN GAAP      |           | US GAAP           |   | CDN GAAP    |           | US GAAP
|                              |                                      |   |               |           |                   |   |             |           |        
|ASSETS                        |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|CURRENT                       |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|                              | Cash                                 |   | $             | 29,706    |                   |   | $           | 29,706    |         |   | $           | 63,169     |  |   | $           | 63,169     | 
|                              | Accounts receivable                  |   |               | 9,666,095 |                   |   |             | 9,666,095 |         |   |             | 14,291,574 |  |   |             | 14,098,457 | 
|                              | Inventory                            |   |               | 9,517,152 |                   |   |             | 9,517,152 |         |   |             | 10,488,445 |  |   |             | 9,874,445  | 
|                              | Other receivables                    |   |               | 242,500   |                   |   |             | 242,500   |         |   |             | 235,000    |  |   |             | 235,000    | 
|                              | Income taxes recoverable             |   |               |          |                   |   |             |          |         |   |             | 120,000    |  |   |             | 120,000    | 
|                              | Prepaid expenses, deposits and other |   |               | 249,112   |                   |   |             | 249,112   |         |   |             | 1,407,169  |  |   |             | 1,398,460  | 
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|                              |                                      |   | 19,704,565    |           |                   |   | 19,704,565  |           |         |   | 26,605,357  |            |  |   | 25,789,531  |           
|PROPERTY, PLANT AND EQUIPMENT |                                      |   | 1,410,590     |           |                   |   | 1,410,590   |           |         |   | 2,198,086   |            |  |   | 1,980,511   |           
|DEFERRED REFINANCING FEES     |                                      |   | 500,000       |           |                   |   | 500,000     |           |         |   | 633,334     |            |  |   | 633,334     |           
|GOODWILL                      |                                      |   |              |           |                   |   |            |           |         |   | 161,616     |            |  |   |            |           
|INVESTMENT IN ALLIED          |                                      |   |              |           |                   |   |            |           |         |   |            |            |  |   | 116,847     |           
|PRODUCT DEVELOPMENT COSTS     |                                      |   | 14,378        |           |                   |   |            |           |         |   | 31,631      |            |  |   |            |           
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|                              |                                      | $ | 21,629,533    |           |                   | $ | 21,615,155  |           |         | $ | 29,630,024  |            |  | $ | 28,520,223  |           
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|LIABILITIES                   |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|CURRENT                       |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|                              | Bank indebtedness                    |   | $             | 9,851,535 |                   |   | $           | 9,851,535 |         |   | $           | 12,461,424 |  |   | $           | 11,741,424 | 
|                              | Accounts payable                     |   |               | 4,898,367 |                   |   |             | 4,898,367 |         |   |             | 6,736,089  |  |   |             | 6,377,919  | 
|                              | Accrued liabilities                  |   |               | 2,001,157 |                   |   |             | 1,996,469 |         |   |             | 1,994,647  |  |   |             | 1,982,022  | 
|                              | Long-term debt                       |   |               | 1,956,588 |                   |   |             | 1,956,588 |         |   |             | 2,067,558  |  |   |             | 2,067,558  | 
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|                              |                                      |   | 18,707,647    |           |                   |   | 18,702,959  |           |         |   | 23,259,718  |            |  |   | 22,168,923  |           
|LONG-TERM DEBT                |                                      |   | 498,039       |           |                   |   | 498,039     |           |         |   | 1,154,088   |            |  |   | 1,154,088   |           
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|                              |                                      |   | 19,205,686    |           |                   |   | 19,200,998  |           |         |   | 24,413,806  |            |  |   | 23,323,011  |           
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|SHAREHOLDERS EQUITY          |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|CAPITAL STOCK                 |                                      |   | 16,300,761    |           |                   |   | 16,300,761  |           |         |   | 16,300,761  |            |  |   | 16,300,761  |           
|DEFICIT                       |                                      |   | (13,876,914   | )         |                   |   | (13,886,604 | )         |         |   | (11,084,543 | )          |  |   | (11,103,549 | )         
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|                              |                                      |   | 2,423,847     |           |                   |   | 2,414,157   |           |         |   | 5,216,218   |            |  |   | 5,197,212   |           
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           
|                              |                                      | $ | 21,629,533    |           |                   | $ | 21,615,155  |           |         | $ | 29,630,024  |            |  | $ | 28,520,223  |           
|                              |                                      |   |               |           |                   |   |             |           |         |   |             |            |  |   |             |           

20



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##### 



CABLETEL COMMUNICATIONS CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|14. |  | UNITED STATES ACCOUNTING PRINCIPLES(continued)
|--- |  | ----------------------------------------------



| | (a) |  | Earnings Per Share                                                                                                                                                                  
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Net loss per share
calculations under U.S. GAAP would not differ materially from that
reported under Canadian GAAP and accordingly
earnings per share would be disclosed as follows:

|                                     |                        |  |                      |           |                    |  |      |           |      |  |  |           |   |  |  |           |  
|------------------------------------ | ---------------------- |  | -------------------- | --------- | ------------------ |  | ---- | --------- | ---- |  |  | --------- | - |  |  | --------- | -
|                                     |                        |  | For the Three Months |           | For the Six Months
|                                     |                        |  | Ended June 30,       |           | Ended June 30,    
|                                     |                        |  |                      |           |                   
|                                     |                        |  | 2003                 |           | 2002               |  | 2003 |           | 2002
|                                     |                        |  |                      |           |                    |  |      |           |     
|Net loss per share:                  |                        |  |                      |           |                    |  |      |           |      |  |  |           |   |  |  |          
|                                     | Basic
loss per share   |  |                      | ($0.36    | )                  |  |      | ($0.09    | )    |  |  | ($0.39    | ) |  |  | ($0.09    | )
|                                     |                        |  |                      |           |                    |  |      |           |      |  |  |           |   |  |  |          
|                                     | Diluted
loss per share |  |                      | ($0.36    | )                  |  |      | ($0.09    | )    |  |  | ($0.39    | ) |  |  | ($0.09    | )
|                                     |                        |  |                      |           |                    |  |      |           |      |  |  |           |   |  |  |          
|Weighted average shares outstanding: |                        |  |                      |           |                    |  |      |           |      |  |  |           |   |  |  |          
|                                     | Basic                  |  |                      | 7,167,612 |                    |  |      | 7,167,612 |      |  |  | 7,167,612 |   |  |  | 7,167,612 |  
|                                     |                        |  |                      |           |                    |  |      |           |      |  |  |           |   |  |  |          
|                                     | Diluted                |  |                      | 7,167,612 |                    |  |      | 7,167,612 |      |  |  | 7,167,612 |   |  |  | 7,167,612 |  
|                                     |                        |  |                      |           |                    |  |      |           |      |  |  |           |   |  |  |          



| | (b) |  | Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Statement of Financial Accounting Standards No. 130 (SFAS 130),
Reporting Comprehensive Income, establishes standards for the
reporting and display of comprehensive income and its components and
requires restatement of all previously reported information for
comparative purposes. For the three and six months ended June 30,
2003, and 2002 the Companys comprehensive income was the same as
net earnings.

21



---



##### 



CABLETEL COMMUNICATIONS CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|14. |  | UNITED STATES ACCOUNTING PRINCIPLES(continued)
|--- |  | ----------------------------------------------



| | (c) |  | Accounting for stock options and pro-forma disclosures required under
SFAS 123                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Issued by the Financial Accounting Standards Board in October, 1996,
Statement of Financial Accounting Standards No. 123, (SFAS 123),
Accounting for Stock-Based Compensation, establishes financial
accounting and reporting standards for stock-based employee
compensation plans as well as transactions in which an entity issues
its equity instruments to acquire goods or services from
non-employees. This statement defines a fair value based method of
accounting for employee stock option or similar equity instruments,
and encourages all entities to adopt that method of accounting for
all their employee stock compensation plans. However, it also
allows an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, (APB 25),
Accounting for Stock Issued to Employees.
|
| |     |  | Entities electing to remain with the accounting in APB 25 must make
pro-forma disclosures of net income and, if presented, earnings per
share, as if the fair value based methods of accounting defined by
SFAS 123 had been applied. SFAS 123 is applicable to fiscal years
beginning after December 15, 1996.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |     |  | The Company accounts for its stock options under Canadian GAAP,
which, in the Companys circumstances are not materially different
from the amounts that would be determined under the provisions of
the APB 25 and related interpretations in accounting for its stock
option plan. No compensation expense has been charged to the
statement of operations for the plan for the three and nine months
ended September 30, 2002 or September 30, 2001. Had compensation
expense for the Companys stock-based compensation plan been
determined based on the fair value at the grant dates for awards
under the Plan consistent with the method under SFAS 123, the
Companys net income and earnings per share would have been reported
as the pro-forma amounts indicated in the table below.                                                                                                                       
|
| |     |  | The fair value of each option grant was estimated on the date of the
grant using the fair value recognition method, with the following
assumptions for the three and six months ended June 30, 2002; risk
free interest rate of 5% dividend yield of 0%, theoretical
volatility assumption of .90, three years vesting provision on all
options granted in 2002 and the expected lives of options of 3 to 7
years. No options were granted during the three and six months
ended June 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                        

22



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##### 



CABLETEL COMMUNICATIONS CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|14. |  | UNITED STATES ACCOUNTING PRINCIPLES(continued)
|--- |  | ----------------------------------------------
|   



| |  | As Reported
| |  | -----------

|                     |         |   |                      |        |                    |   |             |        |             |   |            |        |   |   |          |        |  
|-------------------- | ------- | - | -------------------- | ------ | ------------------ | - | ----------- | ------ | ----------- | - | ---------- | ------ | - | - | -------- | ------ | -
|                     |         |   | For the Three Months |        | For the Six Months
|                     |         |   | Ended June 30,       |        | Ended June 30,    
|                     |         |   |                      |        |                   
|                     |         |   | 2003                 |        | 2002               |   | 2003        |        | 2002       
|                     |         |   | As Reported          |        | As Reported        |   | As Reported |        | As Reported
|                     |         |   |                      |        |                    |   |             |        |            
|Net loss
 U.S. GAAP |         | $ | (2,544,966           | )      |                    | $ | (674,154    | )      |             | $ | (2,792,371 | )      |   | $ | (613,203 | )     
|Net loss per share   |         |   |                      |        |                    |   |             |        |             |   |            |        |   |   |          |       
|                     | Basic   |   |                      | ($0.36 | )                  |   |             | ($0.09 | )           |   |            | ($0.39 | ) |   |          | ($0.09 | )
|                     | Diluted |   |                      | ($0.36 | )                  |   |             | ($0.09 | )           |   |            | ($0.39 | ) |   |          | ($0.09 | )



| |  | Pro-Forma
| |  | ---------

|                                                                  |         |   |                      |        |                    |   |           |        |           |   |            |        |   |   |            |        |  
|----------------------------------------------------------------- | ------- | - | -------------------- | ------ | ------------------ | - | --------- | ------ | --------- | - | ---------- | ------ | - | - | ---------- | ------ | -
|                                                                  |         |   | For the Three Months |        | For the Six Months
|                                                                  |         |   | Ended June 30,       |        | Ended June 30,    
|                                                                  |         |   |                      |        |                   
|                                                                  |         |   | 2003                 |        | 2002               |   | 2003      |        | 2002     
|                                                                  |         |   | Pro-Forma            |        | Pro-Forma          |   | Pro-Forma |        | Pro-Forma
|                                                                  |         |   |                      |        |                    |   |           |        |          
|Net loss
 U.S. GAAP                                              |         | $ | (2,723,624           | )      |                    | $ | (669,496  | )      |           | $ | (2,783,055 | )      |   | $ | (1,315,428 | )     
|Net loss per share                                                |         |   |                      |        |                    |   |           |        |           |   |            |        |   |   |            |       
|                                                                  | Basic   |   |                      | ($0.36 | )                  |   |           | ($0.09 | )         |   |            | ($0.39 | ) |   |            | ($0.18 | )
|                                                                  | Diluted |   |                      | ($0.36 | )                  |   |           | ($0.09 | )         |   |            | ($0.39 | ) |   |            | ($0.18 | )
|                                                                  |         |   |                      |        |                    |   |           |        |           |   |            |        |   |   |            |       
|Weighted average fair value of
options granted during this
period |         |   | N/A                  |        |                    |   | N/A       |        |           |   | N/A        |        |   | $ | 1.25       |       



| | (d) |  | Recent United States Accounting Pronouncements                                                                                                                                                
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Under Staff Accounting Bulletin 74, the Company is required to
disclose certain information related to new accounting
standards which had not yet been adopted due to delayed
effective dates.



| | (i) |  | Statement of Financial Accounting Standards
(SFAS) No. 141, SFAS 142, SFAS 143 and SFAS 144.                                                                      
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | In July 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 141, Business Combinations, and SFAS No. 142
Goodwill and Other Intangible Assets.
|
| |     |  | In August 2001, the FASB issued SFAS No. 143, Accounting for
Asset Retirement Obligations.                                                                        

23



---



##### 



CABLETEL COMMUNICATIONS CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|14. |  | UNITED STATES ACCOUNTING PRINCIPLES(continued)
|--- |  | ----------------------------------------------



| |       |  | In October 2001, the FASB issued SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets.                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |       |  | On January 1, 2002, the Company adopted SFAS No. 141, SFAS No.
142, SFAS No. 143 and SFAS No. 144. The adoption of these
statements did not have a material impact on the Companys
results of operations or financial condition.                                                                                                                                                                                                                                                                                                                
|
| | (ii)  |  | Statement of Financial Accounting Standards No. 146
(SFAS No. 146)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |       |  | In July 2002, the FASB issued SFAS No. 146, which addresses
significant issues regarding the recognition, measurement, and
reporting of costs that are associated with exit and disposal
activities, including restructuring activities that are
currently accounted for pursuant to the guidance that the
Emerging Issues Task Force (EITF) has set forth in EITF issue
No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring).
|
| |       |  | SFAS No. 146 revises the accounting for certain lease
termination costs and employee termination benefits, which are
generally recognized in connection with restructuring
activities. The adoption of this Statement is not expected to
have a material effect on the Companys results of operations
or financial condition.                                                                                                                                                                                                                   
|
| | (iii) |  | Statement of Financial Accounting Standards No. 148 (SFAS No. 148)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |       |  | In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS
No. 148 amends the transition and disclosure provisions of SFAS
No. 123. The Company is currently evaluating SFAS No. 148 to
determine if it will adopt SFAS No. 123 to account for Employee
stock options using the fair value method.                                                                                                                                                                              

24



---



##### 



CABLETEL COMMUNICATIONS CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Canadian Funds)
(Unaudited)

JUNE 30, 2003



|14. |  | UNITED STATES ACCOUNTING PRINCIPLES(continued)
|--- |  | ----------------------------------------------



| | (iv) |  | FASB Interpretation No. 45 (FIN 45)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |      |  | In November 2002, the FASB issued FIN 45, which expands
previously issued accounting guidance and disclosure
requirements for certain guarantees. FIN 45 requires the
Company to recognize an initial liability for the fair value of
an obligation assumed by issuing a guarantee. The provision
for initial recognition and measurement of the liability will
be applied on a prospective basis to guarantees issued or
modified after December 31, 2002. The adoption of FIN 45 is
not expected to materially affect the Companys results of
operations or financial condition.
|
| | (v)  |  | FASB Interpretation No. 46 (FIN 46)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |      |  | In January 2003, FASB issued FIN 46, Consolidation of Variable
Interest Entities which requires the consolidation of variable
interest entities, as defined. FIN 46 is applicable to
financial statements to be issued by the Company after 2002;
however, disclosures are required currently if the Company
expects to consolidate any variable interest entities.                                                                                                                                                                                                              



|15. |  | SUBSEQUENT EVENTS
|--- |  | -----------------



| |  | (i)  | In May, 2002 the Company entered into a new revolving credit facility with
its main bank lender. The new CDN $15 million facility, which replaced
Cabletels previous working capital line, has a three-year term and
provides for up to a $3 million increase over the maximum availability
under Cabletels prior facility. As of June 30, 2003, as a result of a
variation from the required minimum adjusted net worth, interest coverage
ratio and debt service ratio, the Company had a technical violation of the
applicable covenants. The Company is working with its lender to resolve
the matter and expects to receive either a waiver or amendment to the
agreement shortly. There can be no assurance that the Company will be
successful in obtaining either a waiver or amendment. In the event that
the Company is unable to obtain such waiver or amendment it could
adversely affect the Company.
| |  | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (ii) | As of August 15, 2003,
the Company had not reached a final agreement in connection with the
re-negotiation of payment terms with a major supplier (See
note 5iii). The Company expects to continue negotiations for a
further 30 days. If an agreement is not reached by
September 15, 2003, the payee could call an event of default
under the note agreement that could have a material adverse impact on
Cabletel and its business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

25



---



##### 



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

CRITICAL ACCOUNTING POLICIES

Managements Discussion and Analysis of Financial Condition and Results
of Operations includes discussion and analysis of our consolidated financial
statements, which have been prepared in conformity with accounting principles
generally accepted in Canada, which, except as described in Note 14 of the
accompanying financial statements, conform, in all material respects, with the
accounting principles generally accepted in the United States. The preparation
of these financial statements requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. These estimates and their underlying assumptions form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other objective sources. Management bases
its estimates, as appropriate, when changes in events or circumstances indicate
that revisions may be necessary. Significant accounting estimates reflected in
our financial statements include the allowance for doubtful accounts, inventory
excess and obsolescence reserves, discounts, allowances and rebates, income tax
valuation allowances and impairment reviews for investments, fixed assets,
goodwill and other intangibles. Although these estimates are based on
managements knowledge of and experience with past and current events and on
managements assumptions about future events, it is at least reasonably
possible that they may ultimately differ materially from actual results.

Management believes that the following critical accounting policies
require more significant judgments and estimates in the preparation of the
Companys consolidated financial statements. We maintain allowances for
doubtful accounts for estimated losses expected to result from the inability of
our customers to make required payments. These estimates are based on
managements evaluation of the ability of our customers to make payments,
focusing on customer financial difficulties and age of receivable balances. An
adverse change in financial condition of a significant customer or group of
customers could materially affect managements estimates related to doubtful
accounts. We record estimated reductions to revenue for customer programs and
incentive offerings, such as discounts, allowances, and rebates. These
estimates are based on contract terms, historical experience, and other
factors. Management believes it has sufficient historical experience to allow
for reasonable and reliable estimation of these reductions to revenue.
However, declining market conditions could result in increased estimates of
sales returns and allowances resulting in incremental reductions to revenue.
We maintain allowances for excess and obsolete inventory. These estimates are
based on managements assumptions about and analysis of relevant factors
including current levels of orders and backlog, shipment experience, forecasted
demand and market conditions. We do not believe our products are subject to a
significant risk of obsolescence in the short term and management believes it
has the ability to adjust inventory levels to declining demand. However, if
actual market conditions become less favorable than anticipated by management,
additional allowances for excess and obsolete inventory could be required.
Management reviews intangible assets, investments and other long-lived assets
for impairment when events or changes in circumstances indicate that their
carrying values may not be fully recoverable. Goodwill is tested for
impairment annually and on an interim basis when events or

26



---



##### 



circumstances change. Management assesses potential impairment of the carrying
values of these assets based on market prices, if available, or assumptions
about and estimates of future cash flows expected to arise from these assets.
Future cash flows may be adversely impacted by operating performance, market
conditions, and other factors. If an impairment is indicated by this analysis,
the impairment charge to be recognized, if any, would be measured as the amount
by which the carrying value exceeds fair value, estimated by management based
on market prices, if available, or forecasted cash flows, discounted using a
discount rate commensurate with the risks involved. Assumptions related to
future cash flows and discount rates involve management judgment and are
subject to significant uncertainty. If actual future cash flows, discount
rates and other assumptions used in the assessment and measurement of
impairment differ from managements estimates and forecasts, additional
impairment charges could be required. Discussion of 2003 impairment charges is
located within the Companys Management Discussion and Analysis of Financial
Condition and Results of Operations for the three and six months ended June 30,
2003.

The following discussion should be read in conjunction with the Companys
Consolidated Financial Statements and Notes thereto.

Results of Operations

Three and Six Months Ended June 30, 2003

Consolidated net sales for the three months ended June 30, 2003 decreased
by $6,183,409 or 41% to $8,776,970 compared to consolidated net sales of
$14,960,379 for the three months ended June 30, 2002. Consolidated net sales of
$19,895,317 for the six months ended June 30, 2003 decreased by $8,248,748 or
29% compared to consolidated net sales of $28,144,065 for the six months ended
June 30, 2002. The primary reason for the decrease for the three and six month
periods ending June 30, 2003 is attributable to the Companys Distribution
segment where financial and market conditions that impacted growth in the
cable, and satellite industry resulted in reduced capital spending within the
industry. There is a risk that the softening will continue within the
Distribution segment with respect to reduced capital expenditures among the
major cable companies throughout the remainder of the year. This was partially
offset by increased sales in the Manufacturing segment of which sales increased
by 37% for the quarter and 40% for the six month period ending June 30, 2003
when compared to the prior year periods. Virtually all of the Manufacturing
segments sales were exported to foreign countries, primarily to the United
States.

27



---



##### 



The following table shows comparative sales by segment:

|                          |  |                      |           |                    |  |      |            |      |  |   |            |   |  |   |            |  
|------------------------- |  | -------------------- | --------- | ------------------ |  | ---- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                          |  | For the Three Months |           | For the Six Months
|                          |  | Ended June 30,       |           | Ended June 30,    
|                          |  |                      |           |                   
|                          |  | 2003                 |           | 2002               |  | 2003 |            | 2002
|                          |  |                      |           |                    |  |      |            |     
|Distribution              |  | $                    | 6,161,789 |                    |  | $    | 12,906,548 |      |  | $ | 13,997,082 |   |  | $ | 23,844,103 |  
|Manufacturing             |  |                      | 2,262,878 |                    |  |      | 1,647,267  |      |  |   | 4,778,705  |   |  |   | 3,402,490  |  
|Technology                |  |                      | 1,144,773 |                    |  |      | 538,542    |      |  |   | 2,348,565  |   |  |   | 1,249,859  |  
|Less: Inter-company sales |  |                      | (792,470  | )                  |  |      | (131,978   | )    |  |   | (1,229,035 | ) |  |   | (352,387   | )
|                          |  |                      |           |                    |  |      |            |      |  |   |            |   |  |   |            |  
|Net Sales                 |  | $                    | 8,776,970 |                    |  | $    | 14,960,379 |      |  | $ | 19,895,317 |   |  | $ | 28,144,065 |  
|                          |  |                      |           |                    |  |      |            |      |  |   |            |   |  |   |            |  

Net sales of $6,161,789 in the Distribution segment for the three months
ended June 30, 2003 reflects a decrease of $6,744,759 or 52% compared to
$12,906,548 for the three months ended June 30, 2002. Net sales of $13,997,082
in the Distribution segment for the six months ended June 30, 2003 reflects a
decrease of $9,847,021 or 41% compared to $23,844,103 for the six months ended
June 30, 2002. The primary reason for the decrease for the three and six month
periods ending June 30, 2003 in the Distribution segment is attributable to
financial and market conditions that impacted growth in the cable, technology
and satellite industry resulting in reduced capital spending within the
industry during the year.

Net sales in the Manufacturing segment of $2,262,878 for the three months
ended June 30, 2003, reflects an increase of $615,611 or 37% compared to
$1,647,267 for the three months ended June 30, 2002. Net sales in the
Manufacturing segment of $4,778,705 for the six months ended June 30, 2003
reflects an increase of $1,376,215 or 40% compared to $3,402,490 for the six
months ended June 30, 2002. The increase is primarily due to an increase in
sales to customers located in foreign countries. For the three months ended
June 30, 2003 sales to customers in foreign countries, primarily the United
States were $1,470,408 compared to $1,515,299 for the three months ended June
30, 2002. Sales to customers in foreign countries for the six months ended
June 30, 2003 were $3,549,670 compared to $3,050,103 for the six months ended
June 30, 2002.

Net sales of $1,144,773 in the Technology segment for the three months
ended June 30, 2003 reflects an increase of $606,231 or 113% compared to
$538,542 for the three months ended June 30, 2002. Net sales of $2,348,565 in
the Technology segment for the six months ended June 30, 2003 reflects an
increase of $1,098,706 or 88% compared to $1,249,859 for the six months ended
June 30, 2002. The increase is primarily due to the acquisition and
consolidation of Allied, representing approximately $432,000 in sales for the
three months ended June 30, 2003 and $896,000 for the six months ending June
30, 2003.

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Gross profit for the three months ended June 30, 2003 of $703,460
decreased by $1,959,532 or 74% compared to gross profit of $2,662,992 for the
three months ended June 30, 2002. Gross margin for the three months ended June
30, 2003 was 8% compared to 17.8% for the three months ended June 30, 2002.
Gross profit for the six months ended June 30, 2003 of $2,702,154 decreased by
$2,408,852 or 47% compared to gross profit of $5,111,006 for the six months
ended June 30, 2002. Gross margin for the six months ended June 30, 2003 was
13.6% compared to 18% for the six months ended June 30, 2002. The primary
reason for the decrease in gross margin for the three and six months ended June
30, 2003 is due to the Company taking a charge for inventory obsolescence
amounting to approximately $641,000 which was expensed through cost of sales.
In addition, a slowdown in the industry resulted in a more competitive
environment. The Manufacturing segment experienced production shut downs
during periods when tooling changes were required as well as when demand for
product was soft.

Gross profit of $161,503 in the Cabletel Distribution segment for the
three months ended June 30, 2003 reflects a decrease of $1,926,113 or 92%
compared to $2,087,616 for the three months ended June 30, 2002. Cabletel
Distribution segment gross margin for the three months ended June 30, 2003 was
3%, a decrease compared to a gross margin of 16% for the three months ended
June 30, 2002. Gross profit of $1,447,963 in the Cabletel Distribution segment
for the six months ended June 30, 2003 reflects a decrease of $2,475,074 or 63%
compared to $3,923,037 for the six months ended June 30, 2002. Cabletel
Distribution segment gross margin for the six months ended June 30, 2003 was
10.3% a decrease compared to a gross margin of 16.5% for the six months ended
June 30, 2002. The decrease for the three and six months ended June 30, 2003
is primarily due to the Company taking a charge for inventory obsolescence
amounting to approximately $641,000 which was expensed through cost of sales.
In addition, a slowdown in the industry resulted in a more competitive
environment.

Gross profit of $449,747 in the Manufacturing segment for the three months
ended June 30, 2003 reflects a decrease of $65,954 or 12.8% compared to a gross
profit loss of $515,701 for the three months ended June 30, 2002. Manufacturing
segment gross margin for the three months ended June 30, 2003 was 19.9% a
decrease compared to gross margin of 31.3% for the three months ended June 30,
2002. Gross profit of $993,619 in the Manufacturing segment for the six months
ended June 30, 2003 reflects a decrease of $33,095 or 3% compared to gross
profit of $1,026,714 for the six months ended June 30, 2002. Manufacturing
segment gross margin for the six months ended June 30, 2003 was 20.8% a
decrease compared to a gross margin of 30.2% for the six months ended June 30,
2002. The decrease for the three and six months ended June 30, 2003 is
primarily due to a slowdown in the industry which resulted in a more
competitive environment. The Manufacturing segment also experienced production
shut downs during periods when tooling changes were required as well as when
demand for product was soft.

Gross profit of $92,210 in the Technology segment for the three months
ended June 30, 2003 reflects an increase of $32,535 or 54.5% compared to
$59,675 for the three months ended June 30, 2002. Technology segment gross
margin for the three months ended June 30, 2003 was 8%, which is a decrease
compared to the prior period gross margin of 11%. Gross profit of $260,572 in
the Technology segment for the six months ended June 30, 2003 reflects an
increase of $99,317 or 61.6% compared to $161,255 for the six months ended June
30, 2002. Technology

29



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segment gross margin for the six months ended June 30, 2003 was 11%, a decrease
compared to the prior period gross margin of 12.9%. For the three and six
months ended June 30, 2003, the Technology segment experienced the effects of a
slowdown in the industry resulting in a more competitive environment.

Selling, general and administrative expenses for the three months ended
June 30, 2003 decreased $174,146 or 8% to $2,074,136 compared to $2,248,282 for
the three months ended June 30, 2002. As a percentage of sales, selling,
general and administrative expenses for the three months ended June 30, 2003
were 23.6% compared to 14% for the three months ended June 30, 2002. Selling,
general and administrative expenses for the six months ended June 30, 2003
decreased $397,863 or 9% to $1,447,963 compared to $3,923,037 for the six
months ended June 30, 2002. As a percentage of sales, selling, general and
administrative expenses for the six months ended June 30, 2003 were 20%
compared to 16.5% for the six months ended June 30, 2002. The Company has made
a conscious effort to reduce certain costs in an attempt to return the Company
to profitability. Such cost cutting measures included reductions in the
Companys labour force as well as reductions in marketing costs.

Interest expense decreased $13,968 to $241,867 for the three months ended
June 30, 2003 compared to $255,835 for the three months ended June 30, 2002.
Interest expense on bank indebtedness for the three months ended June 30, 2003
decreased by $15,210 due to lower borrowings under the Companys credit
facility, and interest expense on long-term debt increased by $1,242. For the
six months ended June 30, 2003, interest expense increased by $72,707 to
$493,751 compared to $421,044 for the six months ended June 30, 2002. Interest
on bank indebtedness decreased by $1,928, and interest on long-term debt
increased by $74,635. The decrease in interest expense on bank indebtedness
reflects lower levels of borrowings of the Companys line of credit during the
first six months of the year while interest expense on long-term debt was
incurred on a long-term note from the renegotiation of credit terms with a
major supplier during the second quarter of 2002.

Earnings from operations before non-recurring items and income taxes for
the three months ended June 30, 2003 was a loss of $1,937,360 compared to
income of $103,655 for the three months ended June 30, 2002. Total operating
expenses of $2,640,820 for the three months ended June 30, 2003 were $81,483
higher than $2,559,337 reported for the three months ended June 30, 2002.
Earnings from operations before non-recurring items and income taxes for the
six months ended June 30, 2003 was a loss of $2,164,975 compared to income of
$173,606 for the six months ended June 30, 2002. Total operating expenses of
$4,867,129 for the six months ended June 30, 2003 were $70,271 lower than
$4,937,400 reported for the six months ended June 30, 2002. Included in
operating expenses for the three and six months ended June 30, 2003 is a
special charge amounting to $280,000 relating to a severance liability in
connection with a reduction in the Companys work force.

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For the three and six months ended June 30, 2003, the Company wrote down
manufacturing equipment amounting to $400,000. The Company re-assessed the
carrying value of its equipment and determined that there was an impairment in
value and accordingly, took a write down based on the net realizable value of
the equipment.

For the three and six months ended June 30, 2003, the Company recorded a
write off of goodwill amounting to $198,606 in connection with its acquisition
of Allied. The Company assessed the carrying value of the goodwill and
determined that it had been impaired due to Allieds poor performance and
continued uncertainty in the telecommunications industry, as well as
uncertainty as to whether or not Allied will be successful in obtaining an
extension of its senior bank facility beyond its current maturity date.

For the three and six months ended June 30, 2003, Cabletel recorded
special charges of $280,000 related to termination expenses of approximately
25% of Cabletels workforce. As of June 30, 2003, the unpaid balance of these
charges included in accrued liabilities was $280,000. For the three and six
months ended June 30, 2003 the Company had not paid out any funds relating to
the special charge.

For the three and six months ended June 30, 2002, the Company recorded a
non-cash item amounting to $164,000 related to the issuance of warrants in
connection with a settlement of debt with a major supplier. In connection with
the debt settlement the Company issued to the supplier a Warrant to acquire up
to 200,000 shares of the Companys common stock at an exercise price of Cdn.
$1.64 per share up to and including May 31, 2007. In addition, for the three
and six months ended June 30, 2002, the Company wrote off other assets
amounting to $604,809 relating to an amount owed to the Company by Allied.

Inclusive of the previously mentioned write offs, for the three months
ended June 30, 2003, the Company incurred a net loss of $2,544,966 compared to
a net loss of $674,154 for the three months ended June 30, 2002. Basic and
fully diluted loss per share was $0.36 for the three months ended June 30, 2003
compared to basic and fully diluted loss per share of $0.09 for the three
months ended June 30, 2002. Inclusive of the previously mentioned write offs,
for the six months ended June 30, 2003, net loss was $2,792,371 compared to a
net loss of $613,203 for the six months ended June, 30, 2002. Basic and fully
diluted loss per share was $0.39 for the six months ended June 30, 2003
compared to basic and fully diluted loss per share of $0.09 for the six months
ended June 30, 2002.

Financial Liquidity and Capital Resources

Historically, the Company has funded its working capital requirements
through cash flow generated by its operations and bank indebtedness. Net cash
of $58,808 was provided during the three months ended June 30, 2003 by
financing activities. Of such amount $395,693 was provided by bank indebtedness
and $337,685 was used to repay long-term debt on a term loan from the landlord
of the Companys head office building, long-term debt on a note payable to a
major

31



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supplier and to repay long-term debt on an equipment loan. Net cash of
$3,376,908 was used during the six months ended June 30, 2003 by financing
activities. Of such amount $2,609,889 was used to pay down bank indebtedness
and $767,019 was used to repay long-term debt on a term loan from the landlord
of the Companys head office building, long-term debt on a note payable to a
major supplier and to repay long-term debt on an equipment loan.

Net cash used in operating activities for the three months ended June 30,
2003 was $40,142. Cash flow from reductions in inventory amounted to $426,284
and decreases in accounts payables and accrued liabilities amounted to
$1,396,052 and cash provided by reductions in accounts receivable and prepaid
expenses, deposits and other amounted to $1,875,350 and $818,257, respectively.
Net cash provided by operating activities for the six months ended June 30,
2003 was $3,251,731. Cash flow from reductions in inventory amounted to
$371,293 while decreases in accounts payables and accrued liabilities amounted
to $1,831,212. Cash provided by reductions in accounts receivable and prepaid
expenses, deposits and other amounted to $5,225,479 and $1,158,057,
respectively. Income taxes recoverable decreased by $120,000 for the six
months ended June 30, 2003.

Net cash used in investing activities for the three months ended June 30,
2003 was $28,053 relating to goodwill acquired in connection with the Allied
acquisition. Net cash provided by investing activities for the six months
ended June 30, 2003 was $91,714 relating to the acquisition of goodwill
amounting to $36,990 which was offset by the disposal of assets amounting to
128,704.

On May 16, 2002, Cabletel entered into a Revolving Credit Facility
Agreement with LaSalle Business Credit, a division of ABN AMBRO BANK N.V.,
Canada Branch (LaSalle) for a three year committed fifteen million Canadian
dollars (CAD$15,000,000), or its United States dollar equivalent. The new
facility replaces the Companys previous $12 million credit facility with HSBC
Bank Canada. At June 30, 2003 the Company owed $9,370,176 on its Revolving
Credit Facility compared to $11,741,424 at December 31, 2002.

The facility contains certain customary covenants. As of June 30, 2003,
as a result of a variation from the required minimum adjusted net worth,
interest coverage ratio and debt service ratio, the Company had a technical
violation of the applicable covenants. The Company is working with its lender
to resolve the matter and expects to receive either a waiver or amendment to
the agreement shortly. There can be no assurance that the Company will be
successful in obtaining either a waiver or amendment. In the event that the
Company is unable to obtain such waiver or amendment it could adversely affect
the Company.

As of November 1, 2002, the Company began consolidating the results of
Allied, as a result of the Companys ability to convert its convertible
debenture into 100% ownership of all issued and outstanding common shares of
Allied for a nominal consideration. Subsequently, on May 9, 2003, Cabletel
exercised its option and acquired all the outstanding shares of Allied. Allied
is currently in negotiations with its senior bank lender with regards to an
extension of its senior bank

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facility beyond its current maturity date. If Allied is unable to obtain such
an extension, this could adversely affect the consolidated results of the
Company as the Company would be required to write off its investment and
receivables due from goods sold in the ordinary course of business amounting to
approximately $250,000.

The Company has undertaken a restructuring plan to seek to reduce
operating costs and total indebtedness. The restructuring plan is expected to
include the following key components:



| |  | A reduction in the size of its workforce by approximately 25%.                                  
|- |  | ------------------------------------------------------------------------------------------------
| 
| |  | Explore the sale of non-core assets.                                                            
| 
| |  | A reduction of occupancy costs through the consolidation of its
operation into fewer facilities.
| 
| |  | Efforts to renegotiate terms with key suppliers.                                                

The Company has commenced these efforts and believes that, if successful,
they should result in cost savings and increased working capital. However, no
assurances can be given that the restructuring plan can be successfully
completed.

In particular, in connection with its restructuring plan, the Company
announced that it is in the process of seeking to renegotiate the payment terms
of its US $2.2 million senior subordinated promissory note issued to one of its
major suppliers. As a result, it has obtained the consent of the payee to pay
half of each of the full US $120,000 installments due under the note on each of
May 31, June 30 and July 31, 2003. The promissory note, which was issued in May
2002 as part of the conversion of US $2.2 million in outstanding payables owed
by the Company to a major supplier, bears interest at the rate of 12% per annum
and called for repayment in monthly installments of US $60,000 through April
2003 and US $120,000 thereafter through April 30, 2004. In connection with the
restructuring, the Company has been in discussions with the payee of the note
regarding a restructuring which would reduce the monthly payments below the
required US $120,000.

Although discussions with the payee have commenced, to date the Company
and the payee have not agreed upon the terms of a restructuring. Unless an
agreement is reached by August 15, 2003, the Company will be required to pay
the full US $120,000 installment due on August 31, 2003, plus the amount of the
Companys total underpayment of US $180,000 with respect to the May 31, June 30
and July 31, 2003 installments. Unless an agreement is reached, the Company
does not expect to be in a position to make those payments. If the Company is
unable or otherwise fails to make those payments in full it would constitute a
default of the terms of the note, which is unsecured and subordinated to the
rights of the senior bank lenders under the Companys senior credit facility.
The Company has been coordinating its efforts to renegotiate the terms of the
note with its senior bank lenders, who have been supportive of the Company in
that regard. While the Company remains hopeful that it can conclude a
renegotiation of the payment terms of note on terms mutually satisfactory to
the Company, the payee and the bank, no assurances can be given

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that such
agreement can be reached. If no agreement is reached, the Company may not be
in a position to make all of the required payments, an event that could permit the
payee to call an event of default under the note and have a material adverse
impact on the Company and its business.

At June 30, 2003, the Companys current assets exceeded its current
liabilities by $996,918. However, during the three and six months ended June
30, 2003, the liquidation of inventory slowed from prior experience, primarily
as a result of the slowdown in the industry. As a result the Company has been
slower than usual in meeting vendor terms. Should this trend continue it may
present a long-term liquidity concern for the Company.

The Company does not engage in any hedging activities, including, currency
hedging activities, in connection with purchases of merchandise from the United
States, sales to foreign countries, and distribution operation in Israel.

Other

The Companys Consolidated Financial Statements have been prepared in
accordance with accounting principles generally accepted in Canada. Any
material impact of the recently issued Statements of the United States
Financial Accounting Standards Board (FASB) which have not been adopted and,
for which a Canadian counterpart has not been issued, are described in a
footnote to the Companys Consolidated Financial Statements at the required
time of adoption of the Statement in the United States.

Subsequent Events



|(i)  |  | In May, 2002 the Company entered into a new revolving credit facility with
its main bank lender. The new CDN $15 million facility, which replaced
Cabletels previous working capital line, has a three-year term and
provides for up to a $3 million increase over the maximum availability
under Cabletels prior facility. As of June 30, 2003, as a result of a
variation from the required minimum adjusted net worth, interest coverage
ratio and debt service ratio, the Company had a technical violation of the
applicable covenants. The Company is working with its lender to resolve
the matter and expects to receive either a waiver or amendment to the
agreement shortly. There can be no assurance that the Company will be
successful in obtaining either a waiver or amendment. In the event that
the Company is unable to obtain such waiver or amendment it could
adversely affect the Company.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(ii) |  | As of August 15, 2003,
the Company had not reached a final agreement in connection with the
re-negotiation of payment terms with a major supplier (See
note 5iii). The Company expects to continue negotiations for a
further 30 days. If an agreement is not reached by
September 15, 2003, the payee could call an event of default
under the note agreement that could have a material adverse impact on
Cabletel and its business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK

Forward Looking Statements

Certain information and statements contained in this Management Discussion
and Analysis of Financial Condition and Results of Operations and other
sections of this report, including statements using terms such as may,
expect, anticipate, intend, estimate, believe, plan, continue,
could be, or similar variations or the negative thereof, constitute forward
looking statements with respect to the financial condition, results of
operations, and business of Cabletel, including statements that are based on
current expectations, estimates, forecasts, and projections about the markets
in which the Company operates, the margins it expects from its products and its
expectations regarding selling, general and administrative expenses, as well as
managements beliefs and assumptions regarding these markets. Any statements
that are not statements about historical facts also are forward looking
statements. The Private Securities Litigation Reform Act of 1995 (the
Litigation Reform Act) provides a safe harbor for forward looking
statements. These Cautionary Statements are being made pursuant to the
provisions of the Litigation Reform Act and with the intention of obtaining the
benefits of the terms of the safe harbor provisions of the Act. In order to
comply with the terms of the safe harbor, the Company cautions investors that
any forward looking statements made by the Company are not guarantees of future
performance and that a variety of factors could cause the Companys actual
results to differ materially from the anticipated results or other expectations
expressed in the Companys forward looking statements. Several factors that
could cause results or events to differ from current expectations are discussed
below. These factors are not intended to be an all-encompassing list of risks
and uncertainties that may affect the operations, performance, development and
results of the Companys business. In providing forward looking statements,
the Company is not undertaking any obligation to update publicly or otherwise
these statements, whether as a result of new information, future events or
otherwise.

Rapid Technological change and voice data convergence

Cabletel expects that data communications traffic will grow substantially
in the future compared to the modest growth expected for voice traffic. The
growth of data traffic is expected to have a significant impact on traditional
voice networks and create market discontinuities that should drive the
convergence of data and telephony. Many of the Companys traditional customers
have already been investing in data networking and that trend is expected to
continue. Due to the evolving nature of the communications industry and the
technologies involved, there can be no assurance as to the rate of such
convergence.

Rapidly changing technologies, evolving industry standards, frequent new
product introductions, and relatively short product life cycles characterize
the markets for Cabletels products. The Companys success is expected to
depend, in substantial part, on the timely and successful introduction of new
products and upgrades of current products to comply with emerging industry
standards and to address competing technological and product developments
achieved by its competitors. The success of new or enhanced products is
dependent on a number of factors

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including the timely introduction of such products, market acceptance of new
technologies and industry standards, and the pricing and marketing of such
products. An unanticipated change in one or more of the technologies affecting
telecommunications and data networking, or in market demand for products based
on specific technology could have a material adverse effect on the business,
results of operations, and financial condition of the Company if it fails to
respond in a timely and effective manner to such changes.

Competition

All aspects of Cabletels business are highly competitive. Cabletel
competes for sales with national, regional and local distributors, wholesalers
and manufacturers of products for the cable television industry. Various
manufacturers that supply Cabletel also sell their products to Canadian cable
television operators directly or through commissioned agents. In addition,
because of the convergence of the cable telecommunications and computer
industries and rapid technological development, new competitors may seek to
enter the Canadian cable television distribution market. Many of Cabletels
competitors or potential competitors are substantially larger and have greater
resources than the Company. Increased competition could result in price
reductions, reduced profit margins, and loss of market share, each of which
could have a material adverse effect on the business, results of operations,
and financial condition of the Company.

Cabletels commodity products compete on the basis of price and delivery
time. Cabletels higher technology products, such as transmitters and
receivers, compete on the basis of product and specifications and
functionality, as well as price.

International Growth, Foreign Exchange, and Interest Rates

Cabletel is exposed to various market risks, including interest rates and
foreign currency rates. Changes in these rates may adversely affect its
results of operations and financial condition. To manage the volatility
relating to these typical business exposures, Cabletel may enter into various
derivative transactions, when appropriate. Cabletel does not hold or issue
derivative instruments for trading or other speculative purposes. As of June
30, 2003, the Company had no material contracts denominated in foreign
currencies.

The Company is exposed to foreign currency exchange rate risk as a result
of sales of its products in various foreign countries. In addition the
Companys Distribution segment imports approximately 80% of its products from
the United States for resale in Canada. In order to minimize the risks
associated with foreign currency fluctuations, most sales contracts are issued
in either Canadian or U.S. dollars. The Company constantly monitors the
exchange rate between the U.S. dollar, the Canadian dollar and the New Israel
shekel to determine if any adverse exposure exists relative to its costs of
manufacturing. The Company does not maintain New Israel shekel denominated
currency. Instead, U.S. dollars are exchanged for shekels at the time of
payments.

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Cabletel intends to continue to pursue growth opportunities in
international markets. In many international markets, long-standing
relationships, including local content requirements and type approvals, create
barriers to entry. In addition, pursuit of such international growth
opportunities may require significant investments for an extended period before
returns on such investments, if any, are realized. Such projects and
investments could be adversely affected by reversals or delays in opening of
foreign markets to new competitors, exchange controls, currency fluctuations,
investment policies, repatriation of cash, naturalization, social and political
risks, taxation and other factors, depending on the country in which such
opportunities arise. Difficulties in foreign financial markets and economies,
and of foreign financial institutions, could adversely affect demand from
customers in the affected countries.

In order to grow internationally, it is expected that the Company will be
required to provide significant amounts of customer financing in connection
with the sale of products and services.

Capital Spending of Key Customers

Changes in spending patterns of Cabletels key customers will have a
direct effect on the results of the Companys operations and financial
condition. In particular, sales to Rogers Cable Systems Limited, East Link
Cablesystems, Persona Communications Inc., Shaw Communications Inc., and COGECO
Cable Inc., Cabletels largest customers which have accounted for approximately
33%, 28%, 4%, 3% and 3% respectively for the 12 month period ending December
31, 2002, of the Companys total sales. Any future decision by Rogers
Cablesystems Limited or East Link Cablesystems, to reduce purchases could have
a material adverse effect on the Companys business, results of operations, and
financial condition.

General Industry and Market Conditions and Growth Rates

Cabletels future operating results may be affected by various trends and
factors that must be managed in order to achieve desired operating results. In
addition, there are trends and factors beyond the Companys control, which
affect its operations. Such trends and factors include general domestic or
global economic conditions as well as competitive, technological, and
regulatory developments and trends specific to the Companys industry,
customers and markets. These conditions and events could be substantially
different than believed or expected and these differences may cause actual
results to vary materially from the forward looking statements made or the
results which could be expected to accompany such statements.

Cabletel competes in a highly volatile and rapidly growing industry that
is characterized by vigorous competition for market share and rapid
technological development carried out amidst uncertainty over adoption of
industry standards and protection of intellectual property rights.

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These factors could result in aggressive pricing practices and growing competition
both from start-up companies and from well-capitalized communication companies.

Consolidations in the Telecommunications Industry

The telecommunications industry has experienced the consolidation of many
industry participants and this trend is expected to continue. Cabletel and one
or more of its competitors may each supply products to the corporations that
have merged or will merge. This consolidation could result in delays in
purchasing decisions by the merged corporations with the Company playing a
greater or lesser role in supplying the communications products to the merged
entity. These purchasing decisions of the merged companies could have a
material adverse effect on the Companys business, results of operations, and
financial condition.

Mergers among the supplier base have recently increased and this trend is
also expected to continue. The larger combined companies with pooled capital
resources may be able to provide solution alternatives with which the Company
would be put at a disadvantage to compete. The larger breadth of product
offerings these consolidated suppliers could provide could result in customers
electing to trim their supplier base for the advantages of one-stop shopping
solutions for all their product needs. These consolidated supplier companies
could have a material adverse effect on the Companys business, results of
operations, and financial conditions. Current and future strategic alliances
and acquisitions will play a strong role in the Companys ability to compete
within this changing landscape.

ITEM 4.     CONTROLS AND PROCEDURES

The Companys Chief Executive Officer and Chief Financial Officer
(collectively, the Certifying Officers) are responsible for establishing and
maintaining disclosure controls and procedures for establishing and maintaining
disclosure controls and procedures for the Company. Such officers have
concluded (based upon their evaluation of these controls and procedures as of a
date within 90 days of filing of this report) that the Companys disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in this report is accumulated and communicated to the
Companys management, including its Certifying Officers as appropriate, to
allow timely decisions regarding required disclosure. The Certifying Officers
also have indicated that there were no significant changes in the Companys
internal controls or other factors that could significantly affect such
controls subsequent to the date of their evaluation, and there were no
corrective actions with regard to significant deficiencies and material
weaknesses.

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PART II.     OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

The Company is party to legal actions arising in the ordinary course of
its business. In managements opinion, the Company has adequate insurance
coverage and/or legal defenses with respect to any of these actions and does
not believe that they will materially affect the Companys consolidated
financial position or results of operations.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits
| | --- |  | --------



| | (i)  |  | Certification of Chief Executive Officer
| | ---- |  | ----------------------------------------
|
| | (ii) |  | Certification of Chief Financial Officer



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------



| | (i)  |  | The Company filed a current report on Form 8-K dated June 3,
2003. Under ITEM 5 of that 8-K the Company announced that it had
entered into a waiver and amendment to its credit agreement with its
senior bank lender that has resolved previously announced technical
violations with respect to the quarter ended March 31, 2003.                                           
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii) |  | The Company filed a current report on Form 8-K dated August 6,
2003. Under ITEM 5 of that 8-K the Company announced its expectation
of lower revenues and net losses for the second quarter ended June
30, 2003 and describing certain restructuring initiatives, including
efforts to renegotiate terms of a senior subordinated promissory note
terms with a major supplier.

39



---



##### 



SIGNATURES

Pursuant to requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be filed on its behalf by the
undersigned, thereunto duly authorized.

|                       |  |                                      
|---------------------- |  | -------------------------------------
|                       |  | CABLETEL COMMUNICATIONS CORP.        
|                       |  |                                      
|Date:  August 18, 2003 |  | By: /s/ Gregory Walling              
|                       |  |                                      
|                       |  | Gregory Walling                      
|                       |  | President and Chief Executive Officer
|                       |  |                                      
|                       |  |                                      
|Date:  August 18, 2003 |  | By: /s/ Ron Eilath                   
|                       |  |                                      
|                       |  | Ron Eilath                           
|                       |  | Chief Financial Officer and          
|                       |  | Secretary Treasurer                  

40



---



##### 



CERTIFICATIONS

I, Greg Walling, certify that:



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



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



| | 5. |  | The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

Date: August 18, 2003

/s/ Gregory Walling

Gregory Walling
President and CEO

41



---



##### 



CERTIFICATION

I, Ron Eilath, certify that:



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



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



| | 5. |  | The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

Date: August 18, 2003

/s/ Ron Eilath
Ron Eilath
Chief Financial Officer

42