##### Table of Contents



FORM 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended DECEMBER 31, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-16718
 NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
    Title of each class
    
    Name of each exchange on which registered(NONE)
    
    (NONE)
  
  o þ
  o þ
  þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
  o þ




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##### Table of Contents



(1)
    
    Form S-1 Registration Statement declared effective on August 6, 1987 (No. 33-13879).(2)
    
    Form 10-K Annual Reports for fiscal years ended December 31, 1987, December 31, 1988,
December 31, 1990, December 31, 1992 and December 31, 1993 respectively.(3)
    
    Form 10-Q Quarterly Reports for periods ended June 30, 1989, September 30, 1989 and
March 31, 1993, respectively.(4)
    
    Form 8-K dated September 27, 1993(5)
    
    Form 8-K dated March 1, 1996(6)
    
    Form 8-K dated December 5, 1997
 2




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESPART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KSIGNATURESEXHIBIT 10.43EXHIBIT 31(A)EXHIBIT 31(B)EXHIBIT 32(A)EXHIBIT 32(B)    Table of Contents   
 PART I
 
 ITEM 1. BUSINESS
           3




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Vidalia, GA
 Basic Subscribers
    
    
    4,775Expanded Basic Subscribers
    
    
    2,830Premium Subscribers
    
    
    1,429Digital Subscribers
    
    
    546Internet Subscribers
    
    
    152Estimated Homes Passed
    
    
    10,812
 Sandersville, GA
 Basic Subscribers
    
    
    2,699Expanded Basic Subscribers
    
    
    1,596Premium Subscribers
    
    
    922Digital Subscribers
    
    
    58Internet Subscribers
    
    
    15Estimated Homes Passed
    
    
    4,599
 Toccoa and Royston, GA
  Basic Subscribers
    
    
    5,917Expanded Basic Subscribers
    
    
    3,929Premium Subscribers
    
    
    1,570Digital Subscribers
    
    
    381Internet Subscribers
    
    
    440Estimated Homes Passed
    
    
    11,165
   4




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COMPETITION
  Broadcast Television
  Overbuilds
   5




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Direct Broadcast Satellite Service
  Satellite Master Antenna Television
  Multichannel Multipoint Distribution Service Systems
  High-Speed Internet Services
   Telephony Services
  6




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REGULATION AND LEGISLATION
   Cable Rate Regulation
    Must Carry/Retransmission Consent
   7




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Access Channels
  Access to Programming
  Ownership Restrictions
  Internet Service
   8




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##### Table of Contents



Phone Service
  Pole Attachments
  Cable Equipment
   9




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Other Communications Act Provisions and FCC Regulatory Matters
   Copyright
   Franchise Matters
    10




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##### Table of Contents



ITEM
1A. RISK FACTORS
 The Partnerships business is subject to extensive governmental legislation and regulation,
which could adversely affect its business.
  
    
    rules governing the provision of cable equipment and compatibility with new digital technologies;
    
    rules and regulations relating to subscriber privacy;
    
    limited rate regulation;
    
    requirements governing when a cable system must carry a particular broadcast station and
when it must first obtain consent to carry a broadcast station;
    
    rules for franchise renewals and transfers; and
    
    other requirements covering a variety of operational areas such as equal employment
opportunity, technical standards and customer service requirements.
  The Partnerships cable systems are operated under franchises that are subject to non-renewal or
termination. The failure to renew a franchise in one or more key markets could adversely affect the
Partnerships business.
   The Partnerships cable systems are operated under franchises that are non-exclusive. Accordingly,
local franchising authorities can grant additional franchises and create competition in market
areas where none existed previously, resulting in overbuilds, which could adversely affect results
of operations.
  11




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Further regulation of the cable industry could cause the Partnership to delay or cancel service or
programming enhancements or impair the Partnerships ability to raise rates to cover its increasing
costs, resulting in reductions to net income.
   Actions by pole owners might subject the Partnership to significantly increased pole attachment
costs.
  The Partnership may be required to provide access to its networks to other Internet service
providers, which could significantly increase competition and adversely affect the Partnerships
ability to provide new products and services.
  12




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Changes in channel carriage regulations could impose significant additional costs on the
Partnership.
  Offering voice communications service may subject the Partnership to additional regulatory burdens,
causing it to incur additional costs.
  The Partnerships indebtedness could materially and adversely affect its business
  
    
    increase vulnerability to general adverse economic and industry conditions or a downturn in business;
    
    reduce the availability of cash flow to fund working capital, capital expenditures and other general business purposes;
    
    limit flexibility in planning for, or reacting to, changes in
the Partnerships industries, making the Partnership more vulnerable to
economic downturns;
    
    place the Partnership at a competitive disadvantage compared to competitors that have less debt;
    
    limit the Partnerships ability to incur additional indebtedness.
 The Partnership may be unable to complete the sale of its assets on reasonable terms.
  13




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Because there is no public market for the Partnerhsips units of limited partnership interest,
limited partners may not be able to sell their units.
  
    
    the liquidity of any trading market that may develop;
    
    the ability of holders to sell their units; or
    
    the price at which the holders would be able to sell their units.
 Northland Communications Corporation, the managing general partner, is responsible for conducting
the Partnerships business and managing its operations. Affiliates of the managing general partner
may have conflicts of interest and limited fiduciary duties, which may permit the managing general
partner to favor its own interests to the Partnerships detriment.
  Unitholders have limited voting rights and limited ability to influence the Partnerships
operations and activities.
   The control of the managing general partner may be transferred to a third party without unitholder
consent.
  The Partnership does not have its own officers and has a limited number of management employees.
The Partnership relies solely on the officers and management employees of the managing general
partner and its affiliates to manage the Partnerships business and affairs.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  14




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ITEM 3. LEGAL PROCEEDINGS
   15




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ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
  16




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
   Limited Partners:
    
    
    2,576General Partners:
    
    
    2
  
 ITEM 6. SELECTED FINANCIAL DATA
  Years Ended December 31,2005
    
    2004
    
    2003
    
    2002
    
    2001 (1)SUMMARY OF OPERATIONS:Revenue
    
    $
    8,366,133
    
    
    $
    8,638,009
    
    
    $
    8,813,801
    
    
    $
    8,466,877
    
    
    $
    7,820,828Operating income (loss)
    
    
    1,100,239
    
    
    
    1,397,834
    
    
    
    1,693,176
    
    
    
    1,581,340
    
    
    
    (648,251
    )Income (loss) from
continuing operations
    
    
    748,531
    
    
    
    994,025
    
    
    
    1,330,724
    
    
    
    1,069,777
    
    
    
    (1,674,834
    )Income (loss) from
discontinued operations (2)
    
    
    11,644,051
    
    
    
    (202,335
    )
    
    
    13,380,636
    
    
    
    (1,507,530
    )
    
    
    (203,246
    )Net income (loss)
    
    $
    12,392,582
    
    
    $
    791,690
    
    
    $
    14,711,360
    
    
    $
    (437,753
    )
    
    $
    (1,878,080
    )Net income (loss) from
continuing operations per
limited partnership unit
    
    $
    15
    
    
    $
    20
    
    
    $
    27
    
    
    $
    21
    
    
    ($
    33
    )Net income (loss) from
discontinued operations per
limited partnership unit
    
    $
    232
    
    
    ($
    4
    )
    
    $
    267
    
    
    ($
    30
    )
    
    
    (4
    )Net income (loss) per
limited partner unit
    
    $
    247
    
    
    $
    16
    
    
    $
    293
    
    
    ($
    9
    )
    
    ($
    37
    )
 
 (1)
    
    As of December 31, 2001, the Partnership discontinued amortization of its franchise agreements and goodwill in
accordance with SFAS No. 142.(2)
    
    On March 11, 2003, June 30, 2005 and August 1, 2005, the partnership sold the operating assets and franchise rights
of its Washington, Bay City and Brenham systems, respectively. The results of operations and the sales of these
systems are presented as discontinued operations in this filing and the accompanying financial statements. 17




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##### Table of Contents



December 31,2005
    
    2004
    
    2003
    
    2002
    
    2001BALANCE SHEET DATA:Total assets
    
    $
    19,346,142
    
    
    $
    21,849,882
    
    
    $
    24,210,679
    
    
    $
    30,592,898
    
    
    $
    31,097,197Notes payable
    
    
    3,827,998
    
    
    
    18,275,000
    
    
    
    21,500,000
    
    
    
    40,054,185
    
    
    
    41,236,547Total liabilities
    
    
    5,258,889
    
    
    
    19,974,479
    
    
    
    23,126,966
    
    
    
    44,220,545
    
    
    
    44,287,091General partners deficit
    
    
    (69,788
    )
    
    
    (193,714
    )
    
    
    (201,631
    )
    
    
    (348,745
    )
    
    
    (344,367
    )Limited partners capital
(deficit)
    
    
    14,157,041
    
    
    
    2,069,117
    
    
    
    1,285,344
    
    
    
    (13,278,902
    )
    
    
    (12,845,527
    )Cumulative distributions per
limited partner unit
    
    
    63
    
    
    
    63
    
    
    
    63
    
    
    
    63
    
    
    
    63
 Quarters EndedDecember 31,
    
    September 30,
    
    June 30,
    
    March 31,
    
    December 31,
    
    September 30,
    
    June 30,
    
    March 31,2005
    
    2005
    
    2005
    
    2005
    
    2004
    
    2004
    
    2004
    
    2004Revenue
    
    $
    2,068,010
    
    
    $
    2,063,527
    
    
    $
    2,121,584
    
    
    $
    2,113,012
    
    
    $
    2,130,231
    
    
    $
    2,141,149
    
    
    $
    2,187,309
    
    
    $
    2,179,320Operating income
    
    
    239,320
    
    
    
    225,822
    
    
    
    297,736
    
    
    
    337,361
    
    
    
    244,516
    
    
    
    367,264
    
    
    
    402,009
    
    
    
    384,045Income from continuing
operations
    
    
    130,522
    
    
    
    133,460
    
    
    
    212,070
    
    
    
    272,479
    
    
    
    141,119
    
    
    
    271,043
    
    
    
    298,077
    
    
    
    283,786(Loss) income from
discontinued operations
    
    
    (95,476
    )
    
    
    4,591,603
    
    
    
    7,174,896
    
    
    
    (26,972
    )
    
    
    (139,550
    )
    
    
    (37,250
    )
    
    
    2,032
    
    
    
    (27,567
    )Net income
    
    $
    35,046
    
    
    $
    4,725,063
    
    
    $
    7,386,966
    
    
    $
    245,507
    
    
    $
    1,569
    
    
    $
    233,793
    
    
    $
    300,109
    
    
    $
    256,219Net income from
continuing operations per
limited partnership unit
    
    $
    3
    
    
    $
    3
    
    
    $
    4
    
    
    $
    5
    
    
    $
    3
    
    
    $
    5
    
    
    $
    6
    
    
    $
    6Net (loss) income from
discontinued operations
per limited partnership
unit
    
    ($
    2
    )
    
    $
    92
    
    
    $
    143
    
    
    ($
    1
    )
    
    ($
    2
    )
    
    ($
    1
    )
    
    
    
    
    
    ($
    1
    )Net income per limited
partnership unit
    
    $
    1
    
    
    $
    94
    
    
    $
    147
    
    
    $
    5
    
    
    
    
    
    
    $
    5
    
    
    $
    6
    
    
    $
    5
 18




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 RESULTS OF OPERATIONS
 2005 and 2004
   
    
    $6,073,323 (73%) from basic services,
    
    $511,678 (6%) from premium services
    
    $786,184 (10%) from expanded basic services
    
    $95,570 (1%) from digital services
    
    $200,812 (2%) from high speed Internet services
    
    $275,917 (3%) from advertising
    
    $171,313 (2%) from late fees
    
    $251,336 (3%) from other sources.
   2005
    
    2004
    
    2003
    
    2002
    
    2001Basic Rate
    
    $
    37.00
    
    
    $
    35.50
    
    
    $
    32.50
    
    
    $
    30.50
    
    
    $
    31.00Expanded Basic Rate
    
    
    7.50
    
    
    
    9.25
    
    
    
    10.75
    
    
    
    10.35
    
    
    
    8.50HBO Rate
    
    
    11.50
    
    
    
    12.25
    
    
    
    10.25
    
    
    
    9.50
    
    
    
    11.00Cinemax Rate
    
    
    9.00
    
    
    
    9.40
    
    
    
    8.50
    
    
    
    7.50
    
    
    
    7.50Showtime Rate
    
    
    10.25
    
    
    
    10.25
    
    
    
    10.50
    
    
    
    9.00
    
    
    
    9.50Encore Rate
    
    
    2.75
    
    
    
    2.25
    
    
    
    2.25
    
    
    
    2.00
    
    
    
    2.00Starz Rate
    
    
    5.25
    
    
    
    4.50
    
    
    
    3.00
    
    
    
    3.50
    
    
    
    5.00Digital Rate (Incremental)
    
    
    12.00
    
    
    
    16.50
    
    
    
    9.50
    
    
    
    9.50
    
    
    
    9.00Internet Rate
    
    
    35.00
    
    
    
    35.00
    
    
    
    
    
    
    
    
    
    
    
    
   19




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##### Table of Contents



2004 and 2003
   
    
    $6,182,211 (72%) from basic service
    
    $579,180 (7%) from premium services
    
    $1,040,608 (12%) from expanded basic services
    
    $81,248 (1%) from digital services
    
    $37,091 (0%) from Internet services
    
    $263,784 (3%) from advertising
    
    $167,596 (2%) from late fees
    
    $286,291 (3%) from other sources
    20




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LIQUIDITY AND CAPITAL RESOURCES
  2005
    Notes Payable
   21




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##### Table of Contents



2006
    
    
    941,7132007
    
    
    1,165,6332008
    
    
    1,387,5542009
    
    
    333,098$
    3,827,998
   Obligations and Commitments
  Payments Due By PeriodLess than 1
    
    1  3
    
    3  5
    
    More thanTotal
    
    year
    
    years
    
    years
    
    5 yearsNotes payable
    
    $
    3,827,998
    
    
    $
    941,713
    
    
    $
    2,553,187
    
    
    $
    333,098
    
    
    
    Minimum operating lease payments
    
    $
    10,818
    
    
    
    10,074
    
    
    
    744
    
    
    
    
    
    
    
    Total
    
    $
    3,838,816
    
    
    $
    951,787
    
    
    $
    2,553,931
    
    
    $
    333,098
    
    
    
    
 
 (a)
    
    These contractual obligations do not include accounts payable and accrued liabilities,
which are expected to be paid in 2006.(b)
    
    The Partnership also rents utility poles in its operations. Amounts due under these
agreements are not included in the above minimum operating lease payments amounts as,
generally, pole rentals are cancelable on short notice. The Partnership does however
anticipate that such rentals will recur.(c)
    
    Note that obligations related to the Partnerships term loan exclude interest expense. 22




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Capital Expenditures
   SYSTEM SALES
      23




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SOLICITATION OF INTEREST FROM POTENTIAL BUYERS
    CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
  Property and Equipment
   Intangible Assets
   24




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Allocation of Interest Expense to Discontinued Operations
  ECONOMIC CONDITIONS
  TRANSACTIONS WITH MANAGING GENERAL PARTNER AND AFFILIATES
 Management Fees
  Reimbursements
    25




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CERTAIN BUSINESS RELATIONSHIPS
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
   26




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PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
       27




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Audit Committee and Financial Expert.
  28




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##### Table of Contents



Code of Ethics
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 (a)
    
    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Security ownership of management as of
December 31, 2003 is as follows:
 AMOUNT AND NATURENAME AND ADDRESS
    
    OF BENEFICIAL
    
    PERCENT OFTITLE OF CLASS
    
    OF BENEFICIAL OWNER
    
    OWNERSHIP
    
    CLASSGeneral Partners
Interest
    
    Northland Communications
Corporation
    
    (See Note A)
    
    (See Note A)101 Stewart StreetSuite 700Seattle, Washington 98101General Partners
Interest
    
    FN Equities Joint Venture

2780 Skypark Dr.
    
    (See Note B)
    
    (See Note B)Suite 300Torrance, California 90505
    
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    29




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Management Fees
  Reimbursements
       30




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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Year Ended December 31,2005
    
    
    2004Audit fees
    
    $
    83,022
    
    
    $
    67,282Audit-related fees
    
    
    
    
    
    
    Total
    
    $
    83,022
    
    
    $
    67,282
  Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
  31




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PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 SEQUENTIALLYNUMBEREDPAGE(a)
    
    FINANCIAL STATEMENTS:Report of Independent Registered Public Accounting Firm
    
    F-1Balance SheetsDecember 31, 2005 and 2004
    
    F-2Statements of Operations for the years ended December 31, 2005, 2004 and 2003
    
    F-3Statements of Changes in Partners Capital (Deficit) for the years ended
December 31, 2005, 2004 and 2003
    
    F-4Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
    
    F-5Notes to Financial StatementsDecember 31, 2005 and 2004
    
    F-6(b)
    
    REPORTS ON FORM 8-K :Form 8-K disclosing execution of purchase and sale agreement to sell Brenham,
TX system dated February 7, 2005Form 8-K disclosing execution of purchase and sale agreement to sell Bay City,
TX system dated March 1, 2005Form 8-K filed on April 8, 2005 Letter to limited partners regarding mini-tender
offer dated April 7, 2005Form 8-K filed on July 7, 2005 disclosing completion of sale of Bay City systemForm 8-K filed on August 5, 2005 disclosing completion of sale of Brenham systemForm 8-K filed on September 23, 2005 disclosing the settlement of the litigation
with the buyer of the Washington Systems.
 (c)
    
    EXHIBITS:4.1
    
    Forms of Amended and Restated Certificate of Agreement of Limited Partnership(1)10.1
    
    Brenham Franchise (2)10.1
    
    Amendment to Brenham Franchise (4)10.3
    
    Washington County Franchise (2)10.4
    
    Island County Franchise (Amended) (2)10.5
    
    Bay City Franchise (2)10.6
    
    Sweeney Franchise (2)10.7
    
    West Columbia Franchise (2)10.8
    
    Wharton Franchise (2)10.9
    
    Tenneco Development Corp. Franchise (3)
 32




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##### Table of Contents



10.10
    
    Sequim Franchise (1)10.11
    
    Clallam County Franchise (1)10.12
    
    Credit Agreement with National Westminster Bank USA (1)10.13
    
    First, Second and Third Amendments to Credit Agreement with National Westminster Bank USA (3)10.14
    
    Amended and Restated Management Agreement with Northland Communications Corporation (3)10.15
    
    Operating Management Agreement with Northland Cable Television, Inc. (3)10.16
    
    Assignment and Transfer Agreement with Northland Telecommunications Corporation dated May 24, 1989 (4)10.17
    
    Agreement of Purchase and Sale with Sagebrush Cable Limited Partnership (5)10.18
    
    Fourth, Fifth, Sixth and Seventh Amendments to Credit Agreement with National Westminster Bank USA (6)10.19
    
    Franchise Agreement with the City of Sequim, WA effective as of May 6, 1992 (7)10.20
    
    Franchise Agreement with Clallam County, WA effective as of May 29, 1992 (7)10.21
    
    Eighth Amendment to Credit Agreement with National Westminster Bank USA dated as of May 28, 1992 (7)10.22
    
    Asset Purchase Agreement between Northland Cable Properties Seven Limited Partnership (Buyer) and
Country Cable, Inc. (Seller)
(8)10.23
    
    Amendment to Asset Purchase Agreement between Northland Cable Properties Seven Limited Partnership
and Country Cable, Inc. dated September 14, 1993 (9)10.24
    
    Commercial Loan Agreement between Seattle-First National Bank and Northland Cable Properties Seven
Limited Partnership dated September 24, 1993 (9)10.25
    
    Franchise Agreement with Island County, WA dated October 4, 1993 (10)10.26
    
    Franchise Agreement with Skagit County  Assignment and Assumption Agreement dated September 27,
1993 (10)10.27
    
    Franchise Agreement with Whatcom County  Assignment and Assumption Agreement dated September 27,
1993 (10)10.28
    
    Amendment to Commercial Loan Agreement dated March 15, 1994 (10)10.29
    
    Operating and Management Agreement with Northland Cable Television, Inc. dated November 1, 1994 (11)10.30
    
    Asset Purchase Agreement between Northland Cable Properties Seven Limited Partnership and Southland
Cablevision, Inc. (12)10.31
    
    Asset Purchase Agreement between Northland Cable Properties Seven Limited Partnership and TCI
Cablevision of Georgia, Inc.
(12)10.32
    
    Commercial Loan Agreement between Northland Cable Properties Seven Limited Partnership and Seattle
First National Bank dated February 29, 1996 (12)10.33
    
    Asset purchase agreement between Northland Cable Properties Seven Limited Partnership and Robin Media
Group, Inc. (13)10.34
    
    Commercial Loan Agreement between Northland Cable Properties Seven Limited Partnership and Seattle
First National Bank dated December 1, 1997 (13)10.35
    
    First Amendment to Commercial Loan Agreement between Northland Cable Properties Seven Limited
Partnership and Bank of America (fka Seattle First National Bank) dated January 26, 2001 (14)
 33




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##### Table of Contents



10.36
    
    Second Amendment to Commercial Loan Agreement between Northland Cable Properties Seven Limited
Partnership and Bank of America (fka Seattle First National Bank) dated March 31, 2002 (15)10.37
    
    Purchase and Sale Agreement between Northland Cable Properties Seven Limited Partnership and Wave
Division Networks, LLC dated October 28, 2002 (16)10.38
    
    Third Amendment to Amended and Restated Credit Agreement between Northland Cable Properties Seven
Limited Partnership and Bank of America (fka Seattle First national Bank) dated May 15, 2003 (17)10.39
    
    Term Loan Agreement between Northland Cable Properties Seven Limited Partnership and CIT Lending
Services Corporation dated November 3, 2003 (18)10.40
    
    Purchase and Sale Agreement between Northland Cable Properties Seven Limited Partnership and Cequel
III Communications I, LLC dated February 2, 2005 (19)10.41
    
    Purchase and Sale Agreement between Northland Cable Properties Seven Limited Partnership and McDonald
Investment Company, Inc. dated February 24, 2005 (19)10.42
    
    First Amendment to Term Loan Agreement between Northland Cable Properties Seven Limited Partnership
and CIT Lending Services Corporation dated March 28, 2005 (19)10.43
    
    Second Amendment to Term Loan Agreement between Northland Cable Properties Seven Limited Partnership
and CIT Lending Services Corporation dated August 1, 200531 (a)
    
    Certification of Chief Executive Officer of Northland Communications Corporation, the Managing
General Partner, dated March 31, 2006 pursuant to section 302 of the Sarbanes-Oxley Act31 (b)
    
    Certification of President (Principal Financial and Accounting Officer) of Northland Communications
Corporation, the Managing General Partner, dated March 31, 2006 pursuant to section 302 of the
Sarbanes-Oxley Act32 (a)
    
    Certification of Chief Executive Officer of Northland Communications Corporation, the Managing
General Partner, dated March 31, 2006 pursuant to section 906 of the Sarbanes-Oxley Act32 (b)
    
    Certification of President (Principal Financial and Accounting Officer) of Northland Communications
Corporation, the Managing General Partner, dated March 31, 2006 pursuant to section 906 of the
Sarbanes-Oxley Act99.1
    
    Letter regarding representation of Arthur Andersen, LLP dated April 1, 2002 (20)
 34




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##### Table of Contents



(1)
    
    Incorporated by reference from the Partnerships Form S-1 Registration Statement
declared effective on August 6, 1987(2)
    
    Incorporated by reference from the partnerships Form 10-K Annual Report for the fiscal
year ended December 31, 1987.(3)
    
    Incorporated by reference from the partnerships Form 10-K Annual Report for the year
ended December 31, 1988.(4)
    
    Incorporated by reference from the partnerships Form 10-Q Quarterly Report for the
period ended June 30, 1989.(5)
    
    Incorporated by reference from the partnerships Form 10-Q Quarterly Report for the
period ended September 30, 1989.(6)
    
    Incorporated by reference from the partnerships Form 10-K Annual Report for the fiscal
year ended December 31, 1990.(7)
    
    Incorporated by reference from the partnerships Form 10-K Annual Report for the fiscal
year ended December 31, 1992.(8)
    
    Incorporated by reference from the partnerships Form 10-Q Quarterly Report for the
period ended March 31, 1993(9)
    
    Incorporated by reference from the partnerships Form 8-K dated September 27, 1993
Incorporated by reference from the partnerships Form 10-K Annual Report for the fiscal
year ended December 31, 1993.(11)
    
    Incorporated by reference from the partnerships Form 10-K Annual Report for the fiscal
year ended December 31, 1993.(12)
    
    Incorporated by reference from the partnerships Form 8-K dated March 1, 1996.(13)
    
    Incorporated by reference from the partnerships Form 8-K dated December 5, 1997.(14)
    
    Incorporated by reference from the partnerships Form 10-K Annual Report for the fiscal
year ended December 31, 2000.(15)
    
    Incorporated by reference from the partnerships Form 10-Q Quarterly Report for the
period ended June 30, 2002(16)
    
    Incorporated by reference from the partnerships Form 8-K dated March 11, 2003(17)
    
    Incorporated by reference from the partnerships Form 10-Q Quarterly Report for the
period ended June 30, 2003(18)
    
    Incorporated by reference from the partnerships Form 10-Q Quarterly Report for the
period ended September 30, 2003(19)
    
    Incorporated by reference from the partnerships Form 10-K Annual Report for the fiscal
year ended December 31, 2004(20)
    
    Incorporated by reference from the partnerships Form 10-K Annual Report for the fiscal
year ended December 31, 2001 35




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##### Table of Contents



NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIPBy:
    
    NORTHLAND COMMUNICATIONS CORPORATION(Managing General Partner)Date: 3-30-06
    
    By
    
    /S/ JOHN S. WHETZELLJohn S. Whetzell, Chief Executive Officer
  SIGNATURES
    
    CAPACITIES
    
    DATE/S/ JOHN S. WHETZELL

John S. Whetzell
    
    Chief executive officer of registrant; chief executive officer and
chairman of the board of directors of Northland Communications
Corporation
    
    3-30-06/S/ RICHARD I. CLARK
    
    Director of Northland Communications Corporation
    
    3-30-06Richard I. Clark/S/ JOHN E. IVERSON
    
    Secretary and Director of Northland Communications Corporation
    
    3-30-06John E. Iverson/S/ GARY S. JONES
    
    President of Northland Communications Corporation
    
    3-30-06Gary S. Jones
 36




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     
 F - 1




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   2005
    
    
    2004AssetsCash
    
    $
    877,365
    
    
    
    65,547Accounts receivable
    
    
    230,728
    
    
    
    341,965Due from affiliates
    
    
    83,810
    
    
    
    111,960Prepaid expenses
    
    
    74,950
    
    
    
    134,282System sale receivable
    
    
    1,779,553
    
    
    
    411,600Investment in cable television properties:Property and equipment
    
    
    17,046,470
    
    
    
    27,885,405Less accumulated depreciation
    
    
    (10,477,977
    )
    
    
    (17,294,389
    )6,568,493
    
    
    
    10,591,016Franchise agreements (net of accumulated amortization
of $9,995,974 and $10,321,249 in 2005 and 2004, respectively)
    
    
    9,606,966
    
    
    
    9,607,185Total investment in cable television properties
    
    
    16,175,459
    
    
    
    20,198,201Loan fees and other intangibles (net of accumulated amortization
of $729,673 and $852,973 in 2005 and 2004, respectively)
    
    
    124,277
    
    
    
    586,327Total assets
    
    $
    19,346,142
    
    
    
    21,849,882Liabilities and Partners Capital (Deficit)Liabilities:Accounts payable and accrued expenses
    
    $
    1,183,102
    
    
    
    1,262,921Due to Managing General Partner and affiliates
    
    
    46,643
    
    
    
    69,425Deposits
    
    
    16,335
    
    
    
    20,852Subscriber prepayments
    
    
    184,811
    
    
    
    346,281Notes payable
    
    
    3,827,998
    
    
    
    18,275,000Total liabilities
    
    
    5,258,889
    
    
    
    19,974,479Commitments and contingenciesPartners 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
    
    
    
    18,735,576Accumulated deficit
    
    
    (4,397,803
    )
    
    
    (16,666,459
    )14,157,041
    
    
    
    2,069,117Total liabilities and partners capital (deficit)
    
    $
    19,346,142
    
    
    
    21,849,882
  F - 2




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
 2005
    
    
    2004
    
    
    2003Revenue
    
    $
    8,366,133
    
    
    
    8,638,009
    
    
    
    8,813,801Expenses: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
    
    
    
    749,206General 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
    
    
    
    2,100,659Programming (including $2,605, $2,440,
and $55,867, net, paid to affiliates
in 2005, 2004, and 2003, respectively)
    
    
    2,688,255
    
    
    
    2,651,617
    
    
    
    2,753,915Depreciation expense
    
    
    1,587,491
    
    
    
    1,529,666
    
    
    
    1,495,551Loss (gain) on disposal of assets
    
    
    (40,697
    )
    
    
    28,951
    
    
    
    21,2947,265,894
    
    
    
    7,240,175
    
    
    
    7,120,625Operating income
    
    
    1,100,239
    
    
    
    1,397,834
    
    
    
    1,693,176Other income (expense):Interest expense and amortization of loan fees
    
    
    (354,263
    )
    
    
    (408,641
    )
    
    
    (396,572
    )Gain on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    35,591Interest income and other, net
    
    
    2,555
    
    
    
    4,832
    
    
    
    (1,471
    )Income from continuing
operations
    
    
    748,531
    
    
    
    994,025
    
    
    
    1,330,724Discontinued 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
    )
    
    
    13,380,636Net income
    
    $
    12,392,582
    
    
    
    791,690
    
    
    
    14,711,360Allocation of net income:General Partners
    
    $
    123,926
    
    
    
    7,917
    
    
    
    147,114Limited Partners
    
    
    12,268,656
    
    
    
    783,773
    
    
    
    14,564,246Net income per limited partnership unit
    
    
    247
    
    
    
    16
    
    
    
    293Income from continuing operations per
limited partnership unit
    
    
    15
    
    
    
    20
    
    
    
    27Income (loss) from discontinued operations per
limited partnership unit
    
    
    232
    
    
    
    (4
    )
    
    
    267
  F-3




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   General
    
    
    LimitedPartners
    
    
    Partners
    
    
    TotalBalance, December 31, 2002
    
    $
    (348,745
    )
    
    
    (13,278,902
    )
    
    
    (13,627,647
    )Net income
    
    
    147,114
    
    
    
    14,564,246
    
    
    
    14,711,360Balance, December 31, 2003
    
    
    (201,631
    )
    
    
    1,285,344
    
    
    
    1,083,713Net income
    
    
    7,917
    
    
    
    783,773
    
    
    
    791,690Balance, December 31, 2004
    
    
    (193,714
    )
    
    
    2,069,117
    
    
    
    1,875,403Net income
    
    
    123,926
    
    
    
    12,268,656
    
    
    
    12,392,582Distribution declared to Limited Partners
for income taxes
    
    
    
    
    
    
    (180,732
    )
    
    
    (180,732
    )Balance, December 31, 2005
    
    $
    (69,788
    )
    
    
    14,157,041
    
    
    
    14,087,253
  F - 4




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net income
    
    $
    12,392,582
    
    
    
    791,690
    
    
    
    14,711,360Adjustments to reconcile net income to
net cash provided by operating activities:Depreciation expense
    
    
    1,663,369
    
    
    
    2,197,582
    
    
    
    2,334,566Loan 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
    
    
    
    12,878Changes in certain assets and liabilities:Accounts receivable
    
    
    54,202
    
    
    
    109,013
    
    
    
    420,688Prepaid expenses
    
    
    44,977
    
    
    
    (31,698
    )
    
    
    3,009Accounts 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
    
    
    
    1,087,620Cash 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
    
    
    
    19,281,427Insurance proceeds from fund maintained by
affiliate
    
    
    24,242
    
    
    
    
    
    
    
    Proceeds from sale of assets
    
    
    36,562
    
    
    
    1,000
    
    
    
    2,500Net cash provided by (used in)
investing activities
    
    
    13,821,207
    
    
    
    (808,400
    )
    
    
    18,291,066Cash flows from financing activities:Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    21,500,000Principal 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
    )
    
    
    81,158Cash, beginning of year
    
    
    65,547
    
    
    
    758,694
    
    
    
    677,536Cash, end of year
    
    $
    877,365
    
    
    
    65,547
    
    
    
    758,694Supplemental disclosure of cash flow information:Cash paid during the year for interest
    
    $
    1,146,412
    
    
    
    1,302,671
    
    
    
    1,532,108Distribution declared to Limited Partners
for income taxes
    
    
    (180,732
    )
    
    
    
    
    
    
    
  F - 5




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   (1)
    
    Organization and Partners Interests
 (a)
    
    Formation and BusinessNorthland 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 CostsThe 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.
 F - 6
    
    (Continued)




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   (2)
    
    Basis of PresentationCertain 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 SystemsCable 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 ReceivableAccounts 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 EquipmentProperty 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.
 F - 7
    
    (Continued)




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   Depreciation of property and equipment is calculated using the straight-line method over
the following estimated service lives:
 Buildings
    
    20
    yearsDistribution plant
    
    10
    yearsOther equipment
    
    5-20
    years
 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 AssetsEffective 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.
 F - 8
    
    (Continued)




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   (e)
    
    Loan FeesLoan 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:
 2006
    
    $
    38,2392007
    
    
    38,2392008
    
    
    38,2392009
    
    
    9,5602010
    
    $
    124,277
 (f)
    
    Self InsuranceThe 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 RecognitionCable 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
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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 CostsThe 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 InformationThe 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 RiskThe 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 InstrumentsFinancial 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 PrinciplesIn 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 AllocationAll 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.
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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 FeesThe 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)
    
    ReimbursementsThe 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.
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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 AffiliatesThe receivable from the affiliates consists of the following:
 December 312005
    
    
    2004Reimbursable operating costs, net
    
    $
    5,239
    
    
    
    15,569Other amounts due from affiliates, net
    
    
    78,571
    
    
    
    96,391$
    83,810
    
    
    
    111,960
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   (d)
    
    Due to General Partner and AffiliatesThe payable to the General Partner and affiliates consists of the following:
 December 312005
    
    
    2004Management fees
    
    $
    (203
    )
    
    
    (10,595
    )Reimbursable operating costs, net
    
    
    53,004
    
    
    
    82,664Other amounts due to (from) General Partner and
affiliates, net
    
    
    (6,158
    )
    
    
    (2,644
    )$
    46,643
    
    
    
    69,425
 (6)
    
    Property and EquipmentProperty and equipment consists of the following:
 December 312005
    
    
    2004Land and buildings
    
    $
    627,654
    
    
    
    885,708Distribution plant
    
    
    14,824,989
    
    
    
    24,757,732Other equipment
    
    
    1,259,418
    
    
    
    2,148,600Leasehold improvements
    
    
    6,331
    
    
    
    26,178Construction in progress
    
    
    328,078
    
    
    
    67,18717,046,470
    
    
    
    27,885,405Accumulated depreciation
    
    
    (10,477,977
    )
    
    
    (17,294,389
    )Property and equipment, net of accumulated
depreciation
    
    $
    6,568,493
    
    
    
    10,591,016
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   (7)
    
    Accounts Payable and Accrued ExpensesAccounts payable and accrued expenses consists of the following:
 December 312005
    
    
    2004Accounts payable
    
    $
    189,484
    
    
    
    100,888Program license fees
    
    
    439,053
    
    
    
    478,102Interest
    
    
    57,535
    
    
    
    108,584Franchise fees
    
    
    208,525
    
    
    
    283,670Pole rental
    
    
    30,870
    
    
    
    136,385Payroll
    
    
    36,289
    
    
    
    60,195Taxes
    
    
    25,332
    
    
    
    67,531Copyright fees
    
    
    10,872
    
    
    
    26,322Limited Partners tax liability
    
    
    180,732
    
    
    
    Other
    
    
    4,410
    
    
    
    1,244$
    1,183,102
    
    
    
    1,262,921
 (8)
    
    Note PayableIn 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.
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   Annual maturities of the note payable after December 31, 2005, are as follows:
 2006
    
    $
    941,7132007
    
    
    1,165,6332008
    
    
    1,387,5542009
    
    
    333,098$
    3,827,998
 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 TaxesIncome 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
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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 ArrangementsThe 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:
 2006
    
    $
    10,0742007
    
    
    744$
    10,818
 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 RegulationsThe 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
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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.
  F - 17
    
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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
 F - 18
    
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
    Access to Programming 
 Copyright 
 State
and Local Regulation
  F - 19
    
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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.
 (11)
    
    System SaleOn 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
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NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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.
 F - 21
    
    (Continued)




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   The assets and liabilities attributable to the Brenham and Bay City systems as of December 31,
2004 consisted of the following:
 December 31,2004Cash
    
    $
    16,893Accounts receivable
    
    
    179,757Prepaid expenses
    
    
    54,039Property and equipment
    
    
    12,032,462Accumulated depreciation
    
    
    (8,336,538
    )3,695,924Franchise agreements (net of accumulated
amortization of $325,275)
    
    
    219Total assets
    
    $
    3,946,832Accounts payable and accrued expenses
    
    $
    433,206Deposits
    
    
    6,552Subscriber prepayments
    
    
    176,969Total liabilities
    
    $
    616,727
 F - 22
    
    (Continued)




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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   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:
 2005
    
    
    2004
    
    
    2003Revenue
    
    $
    2,750,502
    
    
    
    5,238,241
    
    
    
    6,252,406Expenses: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
    
    
    
    533,077General and administrative (including
$243,342, $461,524, and $573,422
paid to affiliates in 2005, 2004, and
2003, respectively)
    
    
    860,500
    
    
    
    1,383,478
    
    
    
    1,583,455Programming (including $787 paid to
affiliates, $419 received from
affiliates, and $26,671 paid to
affiliates in 2005, 3004 and 2003,
respectively)
    
    
    1,132,189
    
    
    
    2,033,154
    
    
    
    2,317,967Depreciation and amortization
    
    
    75,878
    
    
    
    667,916
    
    
    
    839,015Income from operations
    
    
    436,978
    
    
    
    752,021
    
    
    
    978,892Other 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
    
    
    
    
    
    
    
    14,027,857Income (loss) from operations
of Washington, Brenham
and Bay City systems, net
    
    $
    11,644,051
    
    
    $
    (202,335
    )
    
    
    13,380,636
 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.
 F - 23
    
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##### Table of Contents



NORTHLAND CABLE PROPERTIES
SEVEN LIMITED PARTNERSHIP
   (12)
    
    Solicitation of Interest From Potential BuyersThe 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)
    
    LitigationIn 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.
 F - 24