<PAGE>
                                                                    EXHIBIT 99.6

[KPMG LOGO]

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                              Financial Statements

                           December 31, 2005 and 2004

        (Report of Independent Registered Public Accounting Firm Thereon)
<PAGE>
[KPMG LOGO]
                        KPMG
                        Suite 900
                        801 Second Avenue
                        Seattle, WA 98104


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners
Northland Cable Properties Seven Limited Partnership:


We have audited the accompanying balance sheets of Northland Cable Properties
Seven Limited Partnership (a Washington limited partnership) as of December 31,
2005 and 2004, and the related statements of operations, changes in partner'
capital (deficit), and cash flows for each of the years in the three year period
ended December 31, 2005. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Northland Cable Properties
Seven Limited Partnership as of December 31, 2005 and 2004, and the results of
its operations and its cash flows for each of the years in the three year period
ended December 31, 2005 in conformity with U.S. generally accepted accounting
principles.

                                  /s/ KPMG LLP

Seattle, Washington
February 10, 2006

          KPMG LLP, a U.S. limited liability partnership, is the U.S.
             member firm of KPMG International, a Swiss cooperative.
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                                 Balance Sheets

                           December 31, 2005 and 2004

<TABLE>
<CAPTION>
                                  ASSETS                                        2005              2004
                                                                           ---------------  ----------------
<S>                                                                       <C>               <C>
Cash                                                                      $        877,365            65,547
Accounts receivable                                                                230,728           341,965
Due from affiliates                                                                 83,810           111,960
Prepaid expenses                                                                    74,950           134,282
System sale receivable                                                           1,779,553           411,600

Investment in cable television properties:
 Property and equipment                                                         17,046,470        27,885,405
  Less accumulated depreciation                                               (10,477,977)      (17,294,389)
                                                                           ---------------  ----------------
                                                                                 6,568,493        10,591,016

 Franchise agreements (net of accumulated amortization
  of $9,995,974 and $10,321,249 in 2005 and 2004, respectively)                  9,606,966         9,607,185
                                                                           ---------------  ----------------
             Total investment in cable television properties                    16,175,459        20,198,201
                                                                           ---------------  ----------------
Loan fees and other intangibles (net of accumulated amortization
 of $729,673 and $852,973 in 2005 and 2004, respectively)                          124,277           586,327
                                                                           ---------------  ----------------
             Total assets                                                 $     19,346,142        21,849,882
                                                                           ===============  ================

               LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Liabilities:

 Accounts payable and accrued expenses                                    $      1,183,102         1,262,921
 Due to Managing General Partner and affiliates                                     46,643            69,425
 Deposits                                                                           16,335            20,852
 Subscriber prepayments                                                            184,811           346,281
 Notes payable                                                                   3,827,998        18,275,000
                                                                           ---------------  ----------------
             Total liabilities                                                   5,258,889        19,974,479
                                                                           ---------------  ----------------
Commitments and contingencies

Partners' capital (deficit):
 General Partners:
  Contributed capital                                                             (25,367)          (25,367)
  Accumulated deficit                                                             (44,421)         (168,347)
                                                                           ---------------  ----------------
                                                                                  (69,788)         (193,714)
                                                                           ---------------  ----------------

 Limited Partners:
  Contributed capital, net (49,656 units)                                       18,554,844        18,735,576
  Accumulated deficit                                                          (4,397,803)      (16,666,459)
                                                                           ---------------  ----------------
                                                                                14,157,041         2,069,117
                                                                           ---------------  ----------------
             Total liabilities and partners' capital (deficit)            $     19,346,142        21,849,882
                                                                           ===============  ================
</TABLE>

See accompanying notes to financial statements.

                                       2
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                            Statements of Operations

                  Years ended December 31, 2005, 2004, and 2003

<TABLE>
<CAPTION>
                                                                                     2005               2004               2003
                                                                                 -----------         ----------        -----------
<S>                                                                             <C>                  <C>               <C>
Revenue                                                                         $  8,366,133          8,638,009          8,813,801
                                                                                  ----------          ---------          ---------


Expenses:
 Operating (including $131,060, $143,934, and $131,816, net, paid to
  affiliates in 2005, 2004, and 2003, respectively), excluding
  depreciation and amortization expense
  recorded below                                                                     831,395            797,500            749,206
 General and administrative (including
  $849,330, $849,330, and $901,830, net,
  paid to affiliates in 2005, 2004, and 2003,
  respectively)                                                                    2,199,450          2,232,441          2,100,659
 Programming (including $2,605, $2,440,
  and $55,867, net, paid to affiliates
  in 2005, 2004, and 2003, respectively)                                           2,688,255          2,651,617          2,753,915
 Depreciation expense                                                              1,587,491          1,529,666          1,495,551
 Loss (gain) on disposal of assets                                                   (40,697)            28,951             21,294
                                                                                 -----------         ----------        -----------
                                                                                   7,265,894          7,240,175          7,120,625
                                                                                 -----------         ----------        -----------
         Operating income                                                          1,100,239          1,397,834          1,693,176

Other income (expense):
 Interest expense and amortization of loan fees                                     (354,263)          (408,641)          (396,572)
 Gain on extinguishment of debt                                                           --                 --             35,591
 Interest income and other, net                                                        2,555              4,832             (1,471)
                                                                                 -----------         ----------        -----------
         Income from continuing operations                                           748,531            994,025          1,330,724

Discontinued operations (note 11):
 Income (loss) from operations of Brenham, Bay City and Washington
    Systems, net (including gain on sale systems of $12,547,285 and
    $14,027,857 in 2005 and 2003, respectively)                                   11,644,051           (202,335)        13,380,636
                                                                                 -----------         ----------        -----------
         Net income                                                             $ 12,392,582            791,690         14,711,360
                                                                                 ===========         ==========        ===========

Allocation of net income:
 General Partners                                                               $    123,926              7,917            147,114
 Limited Partners                                                                 12,268,656            783,773         14,564,246

Net income per limited partnership unit                                                  247                 16                293
Income from continuing operations per
 limited partnership unit                                                                 15                 20                 27
Income (loss) from discontinued operations per
 limited partnership unit                                                                232                 (4)               267
</TABLE>

See accompanying notes to financial statements.

                                       3
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

              Statements of Changes in Partners' Capital (Deficit)

                  Years ended December 31, 2005, 2004, and 2003

<TABLE>
<CAPTION>
                                                   GENERAL        LIMITED
                                                  PARTNERS        PARTNERS          TOTAL
                                                ------------   --------------   -------------
<S>                                            <C>             <C>              <C>
Balance, December 31, 2002                     $    (348,745)     (13,278,902)    (13,627,647)

Net income                                           147,114       14,564,246      14,711,360
                                                ------------   --------------   -------------

Balance, December 31, 2003                          (201,631)       1,285,344       1,083,713

Net income                                             7,917          783,773         791,690
                                                ------------   --------------   -------------

Balance, December 31, 2004                          (193,714)       2,069,117       1,875,403

Net income                                           123,926       12,268,656      12,392,582

Distribution declared to Limited Partners
     for income taxes                                     --         (180,732)       (180,732)
                                                ------------   --------------   -------------

Balance, December 31, 2005                     $     (69,788)      14,157,041      14,087,253
                                                ============   ==============   =============
</TABLE>

See accompanying notes to financial statements.


                                       4
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                            Statements of Cash Flows

                  Years ended December 31, 2005, 2004, and 2003

<TABLE>
<CAPTION>
                                                                                 2005          2004          2003
                                                                           ---------------  ------------  -------------
<S>                                                                       <C>               <C>           <C>
Cash flows from operating activities:

 Net income                                                               $     12,392,582       791,690     14,711,360
 Adjustments to reconcile net income to
    net cash provided by operating activities:
       Depreciation expense                                                      1,663,369     2,197,582      2,334,566
       Loan fee amortization                                                        97,981       137,986        743,198
       (Gain) loss on asset dispositions                                       (12,804,336)       28,951    (14,006,563)
       Loss (gain) on extinguishment of debt                                       717,485            --        (35,589)
       Other                                                                            --        41,218         12,878
       Changes in certain assets and liabilities:
         Accounts receivable                                                        54,202       109,013        420,688
         Prepaid expenses                                                           44,977       (31,698)         3,009
         Accounts payable and accrued expenses                                    (567,373)      105,680     (1,968,519)
         Due to/from General Partner and affiliates                                  5,368       (27,086)      (953,228)
         Deposits                                                                    2,674         2,642            (90)
         Subscriber prepayments                                                    (32,254)      (11,848)      (174,090)
                                                                           ---------------  ------------  -------------
            Net cash provided by operating
               activities                                                        1,574,675     3,344,130      1,087,620
                                                                           ---------------  ------------  -------------
Cash flows from investing activities:

 Purchase of property and equipment                                             (1,340,443)   (1,518,294)      (992,861)
 Proceeds from sale of systems                                                  15,100,846       708,894     19,281,427
 Insurance proceeds from fund maintained by
    affiliate                                                                       24,242            --             --
 Proceeds from sale of assets                                                       36,562         1,000          2,500
                                                                           ---------------  ------------  -------------
            Net cash provided by (used in)
               investing activities                                             13,821,207      (808,400)    18,291,066
                                                                           ---------------  ------------  -------------
Cash flows from financing activities:

 Proceeds from notes payable                                                            --            --     21,500,000
 Principal payments on notes payable                                           (14,447,002)   (3,225,000)   (40,054,185)
 Loan fees                                                                        (137,062)       (3,877)      (743,343)
                                                                           ---------------  ------------  -------------
            Net cash used in financing activities                              (14,584,064)   (3,228,877)   (19,297,528)
                                                                           ---------------  ------------  -------------
            Increase (decrease) in cash                                            811,818      (693,147)        81,158
Cash, beginning of year                                                             65,547       758,694        677,536
                                                                           ---------------  ------------  -------------
Cash, end of year                                                         $        877,365        65,547        758,694
                                                                           ===============  ============  =============
Supplemental disclosure of cash flow information:

 Cash paid during the year for interest                                   $      1,146,412     1,302,671      1,532,108
 Distribution declared to Limited Partners
    for income taxes                                                              (180,732)           --             --
</TABLE>

See accompanying notes to financial statements.


                                       5
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

(1)   ORGANIZATION AND PARTNERS' INTERESTS

      (A)   FORMATION AND BUSINESS

            Northland Cable Properties Seven Limited Partnership (the
            Partnership), a Washington limited partnership, was formed on April
            17, 1987. The Partnership was formed to acquire, develop, and
            operate cable television systems. The Partnership began operations
            on September 1, 1987. The Partnership's systems include a system
            serving four cities in or around Vidalia, Georgia; a system serving
            two cities in or around Sandersville, Georgia; and two systems
            serving several communities in and around Toccoa and Royston,
            Georgia. The Partnership has 17 nonexclusive franchises to operate
            the cable systems for periods, which will expire at various dates
            through 2024.

            On March 11, 2003, the Partnership sold the operating assets and
            franchise rights of its cable systems in and around Sequim and
            Camano Island, Washington (the Washington Systems). On June 30, 2005
            and August 1, 2005, the Partnership sold the operating assets and
            franchise rights of its cable systems serving the communities of Bay
            City and Brenham, Texas, respectively. The accompanying financial
            statements present the results of operations and the sales of the
            Sequim, Camano Island, Bay City and Brenham systems as discontinued
            operations.

            Northland Communications Corporation is the General Partner (the
            General Partner or Northland) of the Partnership. Certain affiliates
            of the Partnership also own and operate other cable television
            systems. In addition, Northland manages cable television systems for
            another limited partnership and an LLC for which it serves as
            General Partner and Managing Member, respectively.

            FN Equities Joint Venture, a California joint venture, is the
            Administrative General Partner of the Partnership.

            Collectively, the General Partner and the Administrative General
            Partner are referred to herein as the General Partners.

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

      (B)   CONTRIBUTED CAPITAL, COMMISSIONS, AND OFFERING COSTS

            The capitalization of the Partnership is set forth in the
            accompanying statements of changes in partners' capital (deficit).
            No Limited Partner is obligated to make any additional contribution.

            Northland contributed $1,000 to acquire its 1% interest in the
            Partnership.

            Pursuant to the Partnership Agreement, brokerage fees paid to an
            affiliate of the Administrative General Partner and other offering
            costs paid to the General Partner were recorded as a reduction of
            Limited Partners' capital upon formation of the Partnership. The
            Administrative General Partner received a fee for providing certain
            administrative services to the Partnership.


                                       6                             (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

(2)   BASIS OF PRESENTATION

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

      The preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported
      amount of assets and liabilities and the disclosure of contingent assets
      and liabilities at the date of the financial statements, and the reported
      amounts of revenues and expenses during the reporting period. Actual
      results could differ from those estimates.

(3)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (A)   ACQUISITION OF CABLE TELEVISION SYSTEMS

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

      (B)   ACCOUNTS RECEIVABLE

            Accounts receivable consist primarily of amounts due from customers
            for cable television or advertising services provided by the
            Partnership, and are net of an allowance for doubtful accounts of
            $10,900 at December 31, 2005 and $14,500 at December 31, 2004.
            Receivables are stated at net realizable value and are written-off
            when the Partnership deems specific customer invoices to be
            uncollectible.

      (C)   PROPERTY AND EQUIPMENT

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

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

            At the time of retirements, sales or other dispositions of property,
            the original cost and related accumulated depreciation are removed
            from the respective accounts, and the gains or losses are included
            in the statements of operations.


                                       7                             (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

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

<Table>
<S>                               <C>
Buildings                           20 years
Distribution plant                  10 years
Other equipment                   5-20 years
</Table>


            The Partnership periodically evaluates the depreciation periods of
            property and equipment to determine whether events or circumstances
            warrant revised estimates of useful lives.

            The Partnership recorded depreciation expense within continuing
            operations of $1,587,491, $1,529,666, and $1,495,551 in 2005, 2004,
            and 2003, respectively, and depreciation expense within discontinued
            operations of $75,878, $667,916 and $839,015 in 2005, 2004 and 2003,
            respectively.

            In accordance with SFAS No. 144, long-lived assets, such as property
            and equipment, and purchased intangibles subject to amortization,
            are reviewed for impairment whenever events or changes in
            circumstances indicate that the carrying amount of an asset may not
            be recoverable. Recoverability of assets to be held and used is
            measured by a comparison of the carrying amount of an asset to
            estimated undiscounted future cash flows expected to be generated by
            the asset. If the carrying amount of an asset exceeds its estimated
            future cash flows, an impairment charge is recognized by the amount
            by which the carrying amount of the asset exceeds the fair value of
            the asset. Assets to be disposed of would be separately presented in
            the balance sheet and reported at the lower of the carrying amount
            or fair value less costs to sell, and are no longer depreciated. The
            assets and liabilities of a disposed group classified as held for
            sale would be presented separately in the appropriate asset and
            liability sections of the balance sheets.

      (D)   INTANGIBLE ASSETS

            Effective January 1, 2002, the Partnership adopted SFAS No. 142,
            Goodwill and Other Intangible Assets. SFAS No. 142 required that the
            Partnership cease amortization of goodwill and any other intangible
            assets determined to have indefinite lives, and established a new
            method of testing these assets for impairment on an annual basis or
            on an interim basis if an event occurs or circumstances change that
            would reduce the fair value of a reporting unit below its carrying
            value or if the fair value of intangible assets with indefinite
            lives falls below their carrying value. The Partnership determined
            that its franchise agreements met the definition of indefinite lived
            assets due to the history of obtaining franchise renewals, among
            other considerations. Accordingly, amortization of these assets also
            ceased on December 31, 2001. The Partnership tested these
            intangibles for impairment during the fourth quarter of each year
            presented and determined that the fair value of the assets exceeded
            their carrying value. The Partnership determined that there are no
            conditions such as obsolescence, regulatory changes, changes in
            demand, competition, or other factors that would change their
            indefinite life determination. The Partnership will continue to test
            these assets for impairment annually, or more frequently as
            warranted by events or changes in circumstances.


                                       8                             (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

      (E)   LOAN FEES

            Loan fees are being amortized using the straight-line method, which
            approximates the effective interest method, over periods of five to
            six years (current weighted average remaining useful life of 3.25
            years). The Partnership recorded loan fee amortization expense
            attributable to continuing operations of $33,719, $41,370, and
            $181,988 in 2005, 2004, and 2003, respectively as interest expense.
            Amortization expense attributable to discontinued operations was
            $64,262, $96,616 and $561,210 in 2005, 2004 and 2003, respectively.
            Amortization of loan fees for each of the next five years and
            thereafter is expected to be as follows:

<Table>
<S>                               <C>
2006                                 $    38,239
2007                                      38,239
2008                                      38,239
2009                                       9,560
2010
                                     -----------
                                     $   124,277
                                     ===========
</TABLE>

      (F)   SELF INSURANCE

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

            Amounts paid to the affiliate, which maintains the fund for the
            Partnership and its affiliates, are expensed as incurred and are
            included in the statements of operations. To the extent a loss has
            been incurred related to risks that are self-insured, the
            Partnership records an expense for the amount of the loss, net of
            any amounts to be drawn from the fund. Management suspended
            contributions throughout 2002 based on its assessment that the
            current balance would be sufficient to meet potential claims. In
            2005 and 2004, the Partnership was required to make contributions
            and was charged $6,385 and $2,663, respectively, by the fund. As of
            December 31, 2005, the fund (related to all Northland entities) had
            a balance of $202,270.

      (G)   REVENUE RECOGNITION

            Cable television service revenue, including service and maintenance,
            is recognized in the month service is provided to customers. Advance
            payments on cable services to be rendered are recorded as subscriber
            prepayments. Revenues resulting from the sale of local spot
            advertising are recognized when the related advertisements or
            commercials appear before the public. Local spot advertising
            revenues earned in continuing operations were $275,917, $263,784,
            and $580,796 in 2005, 2004, and


                                       9                             (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

            2003, respectively, and local spot advertising revenues in
            discontinued operations were $319,653, $567,755 and $540,097 in
            2005, 2004 and 2003, respectively.

      (H)   ADVERTISING COSTS

            The Partnership expenses advertising costs as they are incurred.
            Advertising costs attributable to continuing operations were $926,
            $11,417, and $256,118 in 2005, 2004, and 2003, respectively, and
            advertising costs attributable to discontinued operations were
            $190,075, $337,550 and $346,755 in 2005, 2004 and 2003,
            respectively.

      (I)   SEGMENT INFORMATION

            The Partnership follows SFAS No. 131, Disclosures About Segments of
            an Enterprise and Related Information. The Partnership manages its
            business and makes operating decisions at the operating segment
            level. Following the operating segment aggregation criteria in SFAS
            No. 131, the Partnership reports business activities under a single
            reportable segment, telecommunications services. Additionally, all
            of its activities take place in the United States of America.

      (J)   CONCENTRATION OF CREDIT RISK

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

      (K)   FAIR VALUE OF FINANCIAL INSTRUMENTS

            Financial instruments consist of cash and notes payable. The fair
            value of the notes payable approximates their carrying value because
            of their variable interest rates (note 8).

      (L)   RECENTLY ADOPTED ACCOUNTING PRINCIPLES

            In November 2004, the EITF ratified its consensus on Issue No.
            03-13, Applying the Conditions in paragraph 42 of FASB Statement No.
            144 in Determining Whether to Report Discontinued Operations, (EITF
            03-13). EITF 03-13 relates to components of an enterprise that are
            either disposed of or classified as held for sale. EITF 03-13 allows
            significant events or circumstances that occur after the balance
            sheet date but before the issuance of financial statements to be
            taken into consideration in the evaluation of whether a component
            should be presented as discontinued or continuing operations, and
            modifies the assessment period guidance to allow for an assessment
            period of greater than one year. The implementation of EITF 03-13
            did not have a material impact on the Partnership's financial
            statements.

(4)   INCOME ALLOCATION

      All items of income, loss, deduction, and credit are allocated 99% to the
      Limited Partners and 1% to the General Partners until the Limited Partners
      have received aggregate cash distributions in an amount equal to aggregate
      capital contributions as defined in the limited partnership agreement.
      Thereafter, the General Partners are allocated 25% and the Limited
      Partners are allocated 75% of partnership income and losses.


                                       10                            (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

      Cash distributions from operations will be allocated in accordance with
      the net income and net loss percentages then in effect. Prior to the
      General Partners receiving cash distributions from operations for any
      year, the Limited Partners must receive cash distributions in an amount
      equal to the lesser of (i) 50% of the Limited Partners' allocable share of
      net income for such year or (ii) the federal income tax payable on the
      Limited Partners' allocable share of net income using the then highest
      marginal federal income tax rate applicable to such net income. Any
      distributions other than from cash flow, such as from the sale or
      refinancing of a system or upon dissolution of the Partnership, will be
      determined according to contractual stipulations in the Partnership
      Agreement.

      The Limited Partners' total initial contributions to capital were
      $24,893,000 ($500 per partnership unit). As of December 31, 2005,
      $3,108,554 ($62.50 per partnership unit) had been distributed to the
      Limited Partners, and the Partnership has repurchased $65,000 of limited
      partnership units (130 units at $500 per unit).

(5)   TRANSACTIONS WITH GENERAL PARTNER AND AFFILIATES

      (A)   MANAGEMENT FEES

            The General Partner receives a fee for managing the Partnership
            equal to 5% of the gross revenues of the Partnership, excluding
            revenues from the sale of cable television systems or franchises.
            Management fees charged to continuing operations by the General
            Partner were $418,214, $431,900, and $440,690, for 2005, 2004, and
            2003, respectively. Management fees charged to discontinued
            operations by the General Partner were $137,300, $261,913 and
            $312,620 in 2005, 2004 and 2003, respectively. Management fees are
            included as a component of general and administrative expenses in
            the accompanying statements of operations.

      (B)   REIMBURSEMENTS

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

            The amounts billed to the Partnership are based on costs incurred by
            the General Partner in rendering the services. The costs of certain
            services are charged directly to the Partnership, based upon the
            personnel time spent by the employees rendering the service. The
            cost of other services is allocated to the Partnership and
            affiliates based upon relative size and revenue. Management believes
            that the methods used to allocate services to the Partnership are
            reasonable. Amounts charged to continuing operations for these
            services were $549,815, $538,664, and $528,682\ for 2005, 2004, and
            2003, respectively. Amounts charged to discontinued operations for
            these services were $136,945, $272,943 and $394,929 in 2005, 2004
            and 2003, respectively.


                                       11                            (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

            The Partnership has entered into operating management agreements
            with certain affiliates managed by the General Partner. Under the
            terms of these agreements, the Partnership or an affiliate serves as
            the managing agent for certain cable television systems and is
            reimbursed for certain operating, programming, and administrative
            expenses. The Partnership's continuing operations received $1,350,
            $55, and $44,572 under the terms of these agreements during 2005,
            2004, and 2003, respectively. The Partnership's discontinued
            operations include $76,400, $135,463 and $135,449 of costs received
            under the terms of these agreements during 2005, 2004 and 2003,
            respectively.

            Northland Cable Service Corporation (NCSC), an affiliate of the
            General Partner, was formed to provide billing system support to
            cable systems owned and managed by the General Partner. In addition,
            NCSC provides technical support associated with the build out and
            upgrade of Northland affiliated cable systems. Cable Ad Concepts, a
            subsidiary of NCSC, manages the development of local advertising as
            well as billing for video commercial advertisements to be cablecast
            on Northland affiliated cable systems. Prior to 2004, the
            Partnership recorded gross advertising revenues and related expenses
            on its statement of operations. Beginning in 2004, the Partnership
            and CAC modified their agreement such that CAC retains all the
            credit risks associated with the advertising activities and a net
            fixed percentage of the related revenues are remitted to the
            Partnership, which are recorded as net advertising revenues. In
            2005, 2004, and 2003, the Partnership's continuing operations
            include $80,376, $132,872, and $83,825, respectively, for these
            services. Of this amount, $48,870 and $107,787 were capitalized in
            2005 and 2004, respectively, related to the build out and upgrade of
            cable systems. The Partnership's discontinued operations include
            $11,007, $18,883 and $51,010 in 2005, 2004 and 2003, respectively,
            for these services. None of these amounts were capitalized.

      (C)   DUE FROM AFFILIATES

            The receivable from the affiliates consists of the following:

<Table>
<Caption>
                                                           DECEMBER 31
                                                    ---------------------------
                                                       2005            2004
                                                    ------------  -------------
<S>                                                 <C>           <C>
Reimbursable operating costs, net                   $     5,239          15,569
Other amounts due from affiliates, net                   78,571          96,391
                                                    -----------   -------------
                                                    $    83,810         111,960
                                                    ===========   =============
</TABLE>


                                       12                            (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

      (D)   DUE TO GENERAL PARTNER AND AFFILIATES

            The payable to the General Partner and affiliates consists of the
            following:

<Table>
<Caption>
                                                             DECEMBER 31
                                                    ---------------------------
                                                        2005           2004
                                                    ------------  -------------
<S>                                                 <C>           <C>
Management fees                                     $      (203)       (10,595)
Reimbursable operating costs, net                        53,004         82,664
Other amounts due to (from) General Partner and
   affiliates, net                                       (6,158)        (2,644)
                                                    -----------   ------------
                                                    $    46,643         69,425
                                                    ===========   ============
</TABLE>

(6)   PROPERTY AND EQUIPMENT

      Property and equipment consists of the following:

<Table>
<Caption>
                                                             DECEMBER 31
                                                    ----------------------------
                                                        2005           2004
                                                    ------------  -------------
<S>                                                 <C>           <C>
Land and buildings                                  $    627,654        885,708
Distribution plant                                    14,824,989     24,757,732
Other equipment                                        1,259,418      2,148,600
Leasehold improvements                                     6,331         26,178
Construction in progress                                 328,078         67,187
                                                    ------------  -------------
                                                      17,046,470     27,885,405
Accumulated depreciation                             (10,477,977)   (17,294,389)
                                                    ------------  -------------
      Property and equipment, net of
         accumulated depreciation                   $  6,568,493     10,591,016
                                                    ============  =============
</TABLE>


                                       13                            (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

(7)   ACCOUNTS PAYABLE AND ACCRUED EXPENSES

      Accounts payable and accrued expenses consists of the following:

<Table>
<Caption>
                                                            DECEMBER 31
                                                    ----------------------------
                                                        2005           2004
                                                    -----------   -------------
<S>                                                 <C>           <C>
Accounts payable                                    $   189,484        100,888
Program license fees                                    439,053        478,102
Interest                                                 57,535        108,584
Franchise fees                                          208,525        283,670
Pole rental                                              30,870        136,385
Payroll                                                  36,289         60,195
Taxes                                                    25,332         67,531
Copyright fees                                           10,872         26,322
Limited Partners tax liability                          180,732             --
Other                                                     4,410          1,244
                                                    -----------   ------------
                                                    $ 1,183,102      1,262,921
                                                    ===========   ============
</TABLE>


(8)   NOTE PAYABLE

      In March and August of 2005, in anticipation of and as a result of the
      sale of the Brenham and Bay City systems, the Partnership amended the
      terms and conditions of its term loan agreement. The terms of the
      amendments modify the principal repayment schedule, the interest rate
      margins and various covenants (described below), and allowed the
      Partnership to retain $300,000 of the proceeds from the sale of the
      Brenham system, to be used for capital spending purposes. The Partnership
      capitalized $137,062, which were paid to the lender in connection with
      these transactions. The term loan is collateralized by a first lien
      position on all present and future assets of the Partnership and matures
      March 31, 2009.

      The interest rate per annum applicable to the Partnership's existing
      credit facility (the Refinanced Credit Facility) is a fluctuating rate of
      interest measured by reference to either: (i) the U.S. dollar prime
      commercial lending rate announced by the lender (Base Rate), plus a
      borrowing margin; or (ii) the London interbank offered rate (LIBOR), plus
      a borrowing margin. Under the amendment to the term loan agreement, the
      applicable borrowing margins vary, based on the Partnership's leverage
      ratio, from 2.75% to 3.50% for Base Rate loans and from 3.75% to 4.50% for
      LIBOR loans.

      Because the Partnership prepaid the Refinanced Credit Facility in excess
      of $5,375,000 prior to the third anniversary of the closing of the
      refinancing transaction, the Partnership was required to pay a prepayment
      fee to the lender, as defined by the terms of the Refinanced Credit
      Facility. The Partnership paid approximately $125,000 as a result of the
      prepayment of the term loan with the Bay City proceeds, and paid
      approximately $93,000 upon remitting the Brenham sale proceeds.

      As of December 31, 2005 and 2004, the balance of the Refinanced Credit
      Facility was $3,827,998 and $18,275,000, respectively.


                                       14                            (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

      Annual maturities of the note payable after December 31, 2005, are as
      follows:

<Table>
<S>                                    <C>
2006                                   $     941,713
2007                                       1,165,633
2008                                       1,387,554
2009                                         333,098
                                         -----------
                                       $   3,827,998
                                         ===========
</TABLE>

      The amendment executed in August of 2005 also further modified the
      covenants, which require the Partnership to comply with specified
      financial ratios, including maintenance, as tested on a quarterly basis
      going forward after effecting for the sale of the Brenham and Bay City
      systems, of: (A) a Maximum Total Leverage Ratio (the ratio of Funded Debt
      to Annualized EBITDA (as defined)) of not more than 2.25 to 1.00; (B) a
      Minimum Interest Coverage Ratio (the ratio of Annualized EBITDA (as
      defined) to aggregate Interest Expense for the immediately preceding four
      consecutive fiscal quarters) of not less than 2.50 to 1.00, increasing
      over time to 3.50 to 1.00; (C) a Minimum Total Debt Service Coverage Ratio
      (the ratio of Annualized EBITDA (as defined) to the Partnership's debt
      service obligations for the following twelve months) of not less than 1.00
      to 1.00, increasing over time to 1.10 to 1.00 (this covenant will not be
      measured during 2005 under the terms of the amendment to the term loan
      agreement); and (D) Maximum Capital Expenditures of not more than
      $2,500,000. As of December 31, 2005, the Partnership was in compliance
      with the terms of the loan agreement.

(9)   INCOME TAXES

      Income taxes have not been recorded in the accompanying financial
      statements because they are obligations of the partners. The federal and
      state income tax returns of the Partnership are prepared and filed by the
      General Partner.

      The tax returns, the qualification of the Partnership as such for tax
      purposes, and the amount of distributable partnership income or loss are
      subject to examination by federal and state taxing authorities. If such
      examinations result in changes with respect to the Partnership's
      qualification or in changes with respect to the income or loss, the tax
      liability of the partners would likely be changed accordingly.

      As a result of the sales of the Brenham and Bay City systems, the Limited
      Partners were allocated taxable income in 2005. State income taxes to be
      paid by the Partnership on behalf of the Limited Partners have been
      recorded as a reduction of Limited Partner's capital. There was no taxable
      income allocated to the Limited Partners in 2004 or 2003. Generally,
      subject to the allocation procedures discussed in the following paragraph,
      taxable income to the Limited Partners is different from that reported in
      the statement of operations principally due to the differences in
      depreciation and amortization expense allowed for tax purposes and the
      amounts recognized under accounting principles generally accepted in the
      United States of America. Historically, there were no other significant
      differences between taxable income and the net loss reported in the
      statements of operations.

      The Partnership agreement provides that tax losses may not be allocated to
      the Limited Partners if such loss allocation would create a deficit in the
      Limited Partners' Capital Account. Such excess losses are


                                       15                            (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

      reallocated to the General Partner (Reallocated Limited Partner Losses).
      In subsequent years, 100% of the Partnership's taxable income is allocated
      to the General Partner until the General Partner has been allocated
      taxable income in amounts equal to the Reallocated Limited Partner Losses.

      Under current federal income tax laws, a partner's allocated share of tax
      losses from a partnership is allowed as a deduction on his individual
      income tax return only to the extent of the partner's adjusted basis in
      his partnership interest at the end of the tax year. Any excess losses
      over adjusted basis may be carried forward to future tax years and are
      allowed as deductions to the extent the partner has an increase in his
      adjusted basis in the Partnership through either an allocation of
      partnership income or additional capital contributions to the Partnership.

      In addition, current tax law does not allow a taxpayer to use losses from
      a business activity in which he does not materially participate (a passive
      activity, e.g., a Limited Partner in a limited partnership) to offset
      other income such as salary, active business income, dividends, interest,
      royalties, and capital gains. However, such losses can be used to offset
      other income from passive activities. Disallowed losses can be carried
      forward indefinitely to offset future income from passive activities.
      Disallowed losses can be used in full when the taxpayer recognizes gain or
      loss upon the disposition of his entire interest in the passive activity.

(10)  COMMITMENTS AND CONTINGENCIES

      (A)   LEASE ARRANGEMENTS

            The Partnership leases certain office facilities and other sites
            under leases accounted for as operating leases. Rental expense
            attributable to continuing operations, related to these leases was
            $22,072, $26,606, and $27,250 in 2005, 2004, and 2003, respectively.
            Rental expense attributable to discontinued operations related to
            these leases was $7,175, $12,300 and $19,798 in 2005, 2004 and 2003,
            respectively. Minimum lease payments through the end of the lease
            terms are as follows:

<Table>
<S>                               <C>
2006                              $       10,074
2007                                         744
                                  --------------
                                  $       10,818
                                  ==============
</TABLE>


            The Partnership also rents utility poles in its operations.
            Generally, pole rentals are cancelable on short notice, but the
            Partnership anticipates that such rentals will recur. Rent expense
            incurred for pole rentals attributable to continuing operations for
            the years ended December 31, 2005, 2004, and 2003 was $166,782,
            $162,024, and $117,272, respectively. Rent expense incurred for pole
            rentals attributable to discontinued operations for the years ended
            December 31, 2005, 2004 and 2003 was $34,981, $59,968 and $84,910,
            respectively.

      (B)   EFFECTS OF REGULATIONS

            The operation of a cable system is extensively regulated at the
            federal, local, and, in some instances, state levels. The Cable
            Communications Policy Act of 1984, as amended, the Cable Television
            Consumer Protection and Competition Act of 1992 (the 1992 Cable
            Act), and the 1996


                                       16                            (Continued)
<PAGE>

                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004

            Telecommunications Act (the 1996 Telecom Act, and, collectively, the
            Cable Act) establish a national policy to guide the development and
            regulation of cable television systems. The Federal Communications
            Commission (FCC) has principal responsibility for implementing the
            policies of the Cable Act. Many aspects of such regulation are
            currently the subject of judicial proceedings and administrative or
            legislative proposals. Legislation and regulations continue to
            change.

            Cable Rate Regulation - Although the FCC established the rate
            regulatory scheme pursuant to the 1992 Cable Act, local
            municipalities, commonly referred to as local franchising
            authorities, are primarily responsible for administering the
            regulation of the lowest level of cable service called the basic
            service tier. The basic service tier typically contains local
            broadcast stations, public, educational, and government access
            channels and various entertainment and home shopping channels.
            Before a local franchising authority begins basic service rate
            regulation, it must certify to the FCC that it will follow
            applicable federal rules. Many local franchising authorities have
            voluntarily declined to exercise their authority to regulate basic
            service rates. In a particular effort to ease the regulatory burden
            on small cable systems, the FCC created special rate rules
            applicable for systems with fewer than 15,000 subscribers owned by
            an operator with fewer than 400,000 subscribers. The special rate
            rules allow for a simplified cost-of-service showing for basic
            service tier programming. All of Northland's systems are eligible
            for these simplified cost-of-service rules, and have calculated
            rates in accordance with those rules.

            Cable Entry into Internet - The U.S. Supreme Court recently ruled
            that cable television systems may deliver high-speed Internet access
            and remain within the protections of Section 703 of the
            Telecommunications Act of 1996 (the Pole Attachment Act). National
            Cable & Telecommunications Assoc. v. Gulf Power Co., Nos. 00-832 and
            00-843, 534 U.S. (January 16, 2002). The Court reversed the Eleventh
            Circuit's decision to the contrary and sustained the FCC decision
            that applied the Pole Attachment Act's rate formula and other
            regulatory protections to cable television systems' attachments over
            which commingled cable television and cable modem services are
            provided. The data services business, including Internet access, is
            largely unregulated at this time apart from federal, state and local
            laws and regulations applicable to businesses in general. Some
            federal, state, local and foreign governmental organizations are
            considering a number of legislative and regulatory proposals with
            respect to Internet user privacy, infringement, pricing, quality of
            products and services and intellectual property ownership. It is
            uncertain how existing laws will be applied to the Internet in areas
            such as property ownership, copyright, trademark, trade secret,
            obscenity and defamation. Additionally, some jurisdictions have
            sought to impose taxes and other burdens on providers of data
            services, and to regulate content provided via the Internet and
            other information services. Northland expects that proposals of this
            nature will continue to be debated in Congress and state
            legislatures in the future. Additionally, the FCC is now considering
            a proposal to impose obligations on some or all providers of
            Internet access services to contribute to the cost of federal
            universal service programs, which could increase the cost of
            Internet access. Currently, Federal court rulings and FCC order
            provide that cable modem revenue be excluded from gross revenues for
            purposes of franchise fee calculations. Cable Modem Services have
            been classified as an "interstate information service," which has
            historically meant that no regulations apply to the provision of
            this service. However, there is likely to be continuing uncertainty
            about the classification and regulation of cable modem services.


                                       17                            (Continued)
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004


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

            Must Carry and Retransmission Consent - The 1992 Cable Act contains
            broadcast signal carriage requirements. Broadcast signal carriage is
            the transmission of broadcast television signals over a cable system
            to cable customers. These requirements, among other things, allow
            local commercial television broadcast stations to elect once every
            three years between "must carry" status or "retransmission consent"
            status. Less popular stations typically elect must carry, which is
            the broadcast signal carriage rule that allows local commercial
            television broadcast stations to require a cable system to carry the
            station. Must carry requests can dilute the appeal of a cable
            system's programming offerings because a cable system with limited
            channel capacity may be required to forego carriage of popular
            channels in favor of less popular broadcast stations electing must
            carry. More popular stations, such as those affiliated with a
            national network, typically elect retransmission consent, which is
            the broadcast signal carriage rule that allows local commercial
            television broadcast stations to negotiate terms (such as mandating
            carriage of an affiliated cable network or a digital broadcast
            signal) for granting permission to the cable operator to carry the
            stations. Retransmission consent demands may require substantial
            payments or other concessions. The FCC has an on-going
            administrative proceeding in which it has evaluated various
            proposals for mandatory carriage of digital television signals. In
            its initial decision the FCC, in part, (i) declined to order the
            carriage of both the analog and digital signals of television
            stations; (ii) determined that a television broadcast station
            licensee that is operating only on its authorized digital channel
            and/or that has surrendered its analog broadcast channel has
            mandatory cable carriage rights within the broadcaster's local
            service area for only the "primary video" programming stream of the
            broadcaster's digital broadcast channel and does not have the right
            to require the cable operator to carry multiple digital programming
            streams, commonly called "multicasting". In February 2005, the FCC
            reaffirmed its earlier decision not to impose (i) a dual carriage
            regulation, and (ii) denial of any "multicast" requirement. The
            broadcast industry trade association and several broadcasters have
            announced that they will challenge the FCC's ruling and will lobby
            Congress for favorable legislation. The FCC may evaluate additional
            modifications to its digital broadcast signal carriage requirements
            in the future. Northland cannot predict the ultimate outcome of this
            proceeding, or the impact any new carriage requirements may have on
            the operation of its cable systems. The President has signed into
            law legislation establishing February 2009 as the deadline to
            complete the broadcast transition to digital spectrum and to reclaim
            analog spectrum. Cable operators may need to take additional
            operational steps at that time to ensure that customers not
            otherwise equipped to receive digital programming, retain access to
            broadcast programming.

            Access Channels - Local franchising authorities can include
            franchise provisions requiring cable operators to set aside certain
            channels for public, educational and governmental access


                                       18                            (Continued)
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004


            programming. Federal law also requires cable systems to designate a
            portion of their channel capacity, up to 15% in some cases, for
            commercial leased access by unaffiliated third parties. The FCC has
            adopted rules regulating the terms, conditions, and maximum rates a
            cable operator may charge for commercial leased access use.

            Access to Programming - The Communications Act and the FCC's
            "program access" rules generally prevent satellite video programmers
            affiliated with cable operators from favoring cable operators over
            competing multichannel video distributors, such as DBS, and limit
            the ability of such programmers to offer exclusive programming
            arrangements to cable operators. The FCC has extended the
            exclusivity restrictions through October 2007. Given the heightened
            competition and media consolidation, it is possible that we will
            find it increasingly difficult to gain access to popular programming
            at favorable terms. Such difficulty could adversely impact our
            business.

            Copyright - Cable systems are subject to federal copyright licensing
            covering carriage of television and radio broadcast signals. The
            possible modification or elimination of this compulsory copyright
            license is the subject of continuing legislative review and could
            adversely affect our ability to obtain desired broadcast
            programming. Moreover, the Copyright Office has not yet provided any
            guidance as to the how the compulsory copyright license should apply
            to newly offered digital broadcast signals. Copyright clearances for
            nonbroadcast programming services are arranged through private
            negotiations. Cable operators also must obtain music rights for
            locally originated programming and advertising from the major music
            performing rights organizations. These licensing fees have been the
            source of litigation in the past, and we cannot predict with
            certainty whether license fee disputes may arise in the future.

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

            Cable franchises generally are granted for fixed terms and in many
            cases include monetary penalties for noncompliance and may be
            terminable if the franchisee fails to comply with material
            provisions. The specific terms and conditions of franchises vary
            materially among jurisdictions. Each franchise generally contains
            provisions governing cable operations, service rates, franchising
            fees, system construction and maintenance obligations, system
            channel capacity, design and technical performance, customer service
            standards, and indemnification protections. One of the state in
            which Northland conducts business has centralized the jurisdiction
            over franchising with a state governmental agencies, rather than
            with municipalities. These new regulations are similar to those that
            govern a public utility. Several other states are also considering
            regulating cable franchises at the state governmental level. The
            effect of such legislation is to simplify and expedite entrance of
            new competitive providers of video, data and voice services into the
            market. Northland anticipate that this trend towards simplified
            entrance into the market will continue. Although state and local
            franchising authorities have considerable discretion in establishing
            franchise terms, there are certain federal limitations. For example,
            local franchising authorities cannot insist on franchise fees
            exceeding 5% of the system's gross cable-related revenues, cannot
            dictate the particular technology used by the


                                       19                            (Continued)
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004


            system, and cannot specify video programming other than identifying
            broad categories of programming.

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

            Phone Service - The 1996 Telecom Act, which amended the
            Communications Act, created a more favorable regulatory environment
            for us to provide telecommunications services. In particular, it
            limited the regulatory role of local franchising authorities and
            established requirements ensuring that we could interconnect with
            other telephone companies to provide a viable service. Many
            implementation details remain unresolved, and there are substantial
            regulatory changes being considered that could impact, in both
            positive and negative ways, our primary telecommunications
            competitors and our own entry into the field of phone service. The
            FCC and state regulatory authorities are considering, for example,
            whether common carrier regulation traditionally applied to incumbent
            local exchange carriers should be modified. The FCC has concluded
            that alternative voice technologies, like certain types of VOIP,
            should be regulated only at the federal level, rather than by
            individual states. A legal challenge to that FCC decision is
            pending. While the FCC's decision appears to be a positive
            development for VoIP offerings, it is unclear whether and how the
            FCC will apply certain types of common carrier regulations, such as
            intercarrier compensation and universal service obligations to
            alternative voice technology. The FCC has already determined that
            providers of phone services using Internet Protocol technology must
            comply with traditional 911 emergency service obligations (E911) and
            it has extended requirements for accommodating law enforcement
            wiretaps to such providers. It is unclear how these regulatory
            matters ultimately will be resolved and how they will affect our
            potential expansion into phone service.

            The foregoing summary does not purport to describe all present and
            proposed federal, state and local regulations and legislation
            affecting the cable or telephony industries. Other existing federal
            regulations, copyright licensing and, in many jurisdictions, state
            and local franchise requirements currently are the subject of a
            variety of judicial proceedings, legislative hearings, and
            administrative and legislative proposals that could alter, in
            varying degrees, the manner in which cable or information service
            systems operate. Northland cannot predict at this time the outcome
            of these proceedings or their impact upon the industry or upon
            Northland's business and operations.

(1)   SYSTEM SALE

      On March 11, 2003, the Partnership sold the operating assets and franchise
      rights of its Washington Systems. The Washington Systems were sold at a
      price of approximately $20,340,000 of which the Partnership received
      approximately $19,280,000 at closing. Substantially all of the proceeds
      were used to pay down amounts outstanding under the Partnership's credit
      agreement. The sales price was adjusted at closing for the proration of
      certain revenues and expenses and approximately $1,060,000 was to be held
      in escrow and released to the Partnership one year from the closing of the
      transaction, subject to general


                                       20                            (Continued)
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004


      representations and warranties. In March of 2004, the Partnership received
      notice from the buyer of the Washington Systems of certain claims, which
      were made under the holdback agreement provisions of the purchase and sale
      agreement. Approximately $412,000 of the original escrow proceeds remained
      in escrow until such claims were resolved. The escrow proceeds in excess
      of the claims were released to the Partnership in March 2004.

      On August 26, 2005, the Partnership and Northland Cable Television, Inc.
      (NCTV), a related party affiliate, settled their ongoing litigation with
      the buyer (Buyer) of the Washington Systems. Buyer had asserted various
      claims against the Partnership and NCTV and withheld sales proceeds of
      $411,600 and $433,200, respectively from each selling company. As a result
      of the settlement Buyer received $390,000 of the aggregate retained sales
      proceeds. Of this amount, $283,200 was allocated to the NCP7 sales
      transaction and has been reflected in discontinued operations as a loss
      from the sale of the systems in the Partnership's statement of operations.
      The Partnership also recorded $35,736 in legal fees in connection with the
      settlement of this litigation.

      The Partnership does not expect that the settlement of these claims, or
      the write off of the amounts remitted to the buyer of the Washington
      Systems, will have any further implication on the Partnership's financial
      statements.

      On June 30, 2005, the Partnership completed the sale of the operating
      assets and franchise rights of its cable systems in and around the
      community of Bay City, Texas to McDonald Investment Company, Inc., an
      unaffiliated third party. The Bay City system was sold at a price of
      approximately $9,345,000 of which the Partnership received approximately
      $8,449,000 at closing. The sales price was adjusted at closing for the
      proration of certain revenues and expenses and approximately $935,000 will
      be held in escrow and released to the Partnership eighteen months from the
      closing of the transaction subject to indemnification claims made, if any,
      by the buyer pursuant to the terms of the purchase and sale agreement.
      Substantially all of the proceeds were used to pay down amounts
      outstanding under the Partnership's term loan agreement. The Partnership
      recorded a gain from the sale of the Bay City System of approximately
      $7,122,000.

      On August 1, 2005, the Partnership completed the sale of the operating
      assets and franchise rights of its cable systems in and around the
      community of Brenham, Texas to Cequel III Communications I, LLC, an
      unaffiliated third party. The Brenham system was sold at a price of
      approximately $7,572,000 of which the Partnership received approximately
      $6,638,000 at closing. The sales price was adjusted at closing for the
      proration of certain revenues and expenses and approximately $850,000 will
      be held in escrow and released to the Partnership eighteen months from the
      closing of the transaction subject to indemnification claims made, if any,
      by the buyer pursuant to the terms of the purchase and sale agreement.
      Under the terms of an amendment to the term loan agreement, executed in
      August of 2005, the Partnership was allowed to retain $300,000 of these
      proceeds for capital spending purposes. The proceeds, less $300,000
      retained for capital spending purposes, were used to pay down amounts
      outstanding under the term loan agreement. The Partnership recorded a gain
      from the sale of the Brenham system of approximately $5,266,000.


                                       21                            (Continued)
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004


       The assets and liabilities attributable to the Brenham and Bay City
       systems as of December 31, 2004 consisted of the following:

<Table>
<Caption>
                                              DECEMBER 31,
                                                  2004
                                              ------------
<S>                                           <C>
Cash                                          $     16,893
Accounts receivable                                179,757
Prepaid expenses                                    54,039
Property and equipment                          12,032,462
Accumulated depreciation                        (8,336,538)
                                              ------------
                                                 3,695,924

Franchise agreements (net of accumulated
   amortization of $325,275)                           219
                                              ------------
      Total assets                            $  3,946,832
                                              ============
Accounts payable and accrued expenses         $    433,206
Deposits                                             6,552
Subscriber prepayments                             176,969
                                              ------------
      Total liabilities                       $    616,727
                                              ============
</TABLE>


                                       22                            (Continued)
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004


       The revenue, expenses and other items attributable to the operations of
       the Washington, Brenham and Bay City systems for the years ended December
       31, 2005, 2004, and 2003 have been reported as discontinued operations in
       the accompanying statements of operations and include the following:

<Table>
<Caption>
                                                      2005               2004               2003
                                                  ------------       ------------       ------------
<S>                                               <C>                <C>                <C>
Revenue                                           $  2,750,502          5,238,241          6,252,406
Expenses:
   Operating (including $35,277 and
      $42,829, received from affiliates, and
      $23,017 paid to affiliates in 2005,
      2004 and 2003, respectively)                     244,957            401,672            533,077
   General and administrative (including
      $243,342, $461,524, and $573,422
      paid to affiliates in 2005, 2004, and
      2003, respectively)                              860,500          1,383,478          1,583,455
   Programming (including $787 paid to
      affiliates, $419 received from
      affiliates, and $26,671 paid to
      affiliates in 2005, 2004 and 2003,
      respectively)                                  1,132,189          2,033,154          2,317,967
   Depreciation and amortization                        75,878            667,916            839,015
                                                  ------------       ------------       ------------
         Income from operations                        436,978            752,021            978,892
Other income (expense):
   Interest expense and amortization of
      loan fees                                       (622,727)          (954,356)        (1,626,113)
   Loss on extinguishment of debt                     (717,485)                --                 --
   Gain on sale of systems                          12,547,285                 --         14,027,857
                                                  ------------       ------------       ------------
         Income (loss) from operations
            of Washington, Brenham
            and Bay City systems, net             $ 11,644,051       $   (202,335)        13,380,636
                                                  ============       ============       ============
</TABLE>

       The Partnership allocated interest expense to discontinued operations
       using the historic weighted average interest rate applicable to the
       Partnership's term loan and approximately $18,713,000 in principal
       payments related to the sale of the Washington systems and approximately
       $14,207,000 in principal payments related to the sales of the Brenham and
       Bay City systems. In addition, the Partnership was required to pay a
       prepayment fee of approximately $218,000 to its lender, as a result of
       the prepayment of the term loan with the Brenham and Bay City proceeds.
       This entire amount, plus a ratable portion of deferred debt costs are
       classified as loss on extinguishment of debt and have been allocated to
       discontinued operations.


                                       23                            (Continued)
<PAGE>
                           NORTHLAND CABLE PROPERTIES
                            SEVEN LIMITED PARTNERSHIP

                          Notes to Financial Statements

                           December 31, 2005 and 2004


(12)  SOLICITATION OF INTEREST FROM POTENTIAL BUYERS

      The General Partner has been working with a nationally recognized
      brokerage firm to solicit offers from potential purchasers for the sale of
      the Partnership's assets for fair value.

      Despite ongoing efforts, the General Partner has been unable to secure any
      offers for the sale of the Partnership's assets at this time. Management
      does not feel that the lack of viable purchase offers for the
      Partnership's remaining cable systems reflect a lack of value in those
      systems or a concern over the operational capabilities of those systems.
      Instead, based on experience, many factors affect the market for cable
      television systems over time, including whether the various companies
      participating in the cable television industry are generally in an
      acquisition mode, the availability of financing through lenders or
      investors and the number of other systems that are either on the market or
      forecasted to soon be offered for sale.

      It is Management's experience, after many years in the cable television
      industry, that it is difficult to forecast the likelihood of receiving a
      solid purchase offer from a financially viable purchaser at any specific
      time. Notwithstanding, the General Partner will continue its efforts to
      solicit offers from potential purchasers from time to time with the goal
      of securing more than one viable offer for the partnership's cable
      systems, however, Management is unable at this time to forecast the
      ultimate outcome of these activities.

(13)  LITIGATION

      In March 2005, Northland filed a compliant against one of its programming
      networks seeking a declaration that a December 2004 contract between
      Northland and the programmer was an enforceable contract related to rates
      Northland would pay for its programming and damages for breach of that
      contract. The programmer counter-claimed, alleging copyright infringement
      and breach of contract. The Partnership is currently in discovery and a
      trial date is set for May 1, 2006. At this time Management cannot
      reasonably estimate the probability of a favorable or unfavorable outcome
      of this case nor can it reasonably estimate the amount of any potential
      recovery or damages that could result from any such outcome.


                                       24