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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

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FORM 10-Q

|ý                                                 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  
|------------------------------------------------- | -----------------------------------------------------------------------------------------
|FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
|OR                                               
|o                                                 | TRANSITION REPORT PURSUANT TO THE SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934
|FROM THE TRANSITION PERIOD FROM
 TO              

COMMISSION FILE NUMBER 333-20307

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POLAND COMMUNICATIONS, INC.(Exact Name of Registrant as Specified in Its Charter)

|NEW YORK(State or Other Jurisdiction of
Incorporation of Organization)                  |  | 06-1070447(IRS Employer Identification No.)
|--------------------------------------------------------------------------------------- |  | -------------------------------------------
|4643 ULSTER STREET
SUITE 1300
DENVER, COLORADO(Address of Principal Executive Officers) |  | 80237(Zip Code)                            

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 770-4001

Indicate by check (X) whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days Yes ý    No o

The
number of shares outstanding of Poland Communications, Inc.'s common stock as of September 30, 2002, was:

Common Stock    18,948

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POLAND COMMUNICATIONS, INC.  FORM 10-Q INDEX  FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

|                                |                                                                                               | PAGE NO.                             
|------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------
|PART I    FINANCIAL INFORMATION |                                                                                               |                                      
|                                | Item 1. Financial Statements                                                                  |                                      
|                                |                                                                                               | Poland Communications, Inc.          
|                                |                                                                                               |                                      
|                                |                                                                                               |                                      
|                                |                                                                                               |                                      
|                                |                                                                                               |                                      
|                                |                                                                                               |                                      
|                                |                                                                                               | Poland Cablevision (Netherlands) B.V.
|                                |                                                                                               |                                      
|                                |                                                                                               |                                      
|                                |                                                                                               |                                      
|                                |                                                                                               |                                      
|                                |                                                                                               |                                      
|                                | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |                                      
|                                | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                      
|                                | Item 4. Controls and Procedures                                                               |                                      
|PART II    OTHER INFORMATION    |                                                                                               |                                      
|                                | Item 1. Legal Proceedings                                                                     |                                      
|                                | Item 2. Changes in Securities and Use of Proceeds                                             |                                      
|                                | Item 3. Defaults Upon Senior Securities                                                       |                                      
|                                | Item 4. Submission of Matters to a Vote of Security Holders                                   |                                      
|                                | Item 5. Other Information                                                                     |                                      
|                                | Item 6. Exhibits and Reports on Form 8-K                                                      |                                      

2

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PART I    FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

POLAND COMMUNICATIONS, INC.  CONSOLIDATED BALANCE SHEETS  (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                                                                                                                    |                                                                                                        | SEPTEMBER 30,
2002                         |         | DECEMBER 31,
2001 |        
|----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------- | ----------------- | -------
|
|ASSETS                                                                                                                              |                                                                                                        |                                            |         |                   |        
|Current assets:                                                                                                                     |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    | Cash and cash equivalents                                                                              |                                            | $       | 3,632             |        
|                                                                                                                                    | Trade accounts receivable, net of allowance for doubtful accounts of $3,294 in 2002 and $2,765 in 2001 |                                            |         | 5,319             |        
|                                                                                                                                    | Prepayments                                                                                            |                                            |         | 548               |        
|                                                                                                                                    | Due from affiliates                                                                                    |                                            |         | 53                |        
|                                                                                                                                    | Other current assets                                                                                   |                                            |         | 89                |        
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    |                                                                                                        | Total current assets                       |         |                   | 9,641  
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|Property, plant and equipment:                                                                                                      |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    | Cable system assets                                                                                    |                                            |         | 165,056           |        
|                                                                                                                                    | Construction in progress                                                                               |                                            |         | 789               |        
|                                                                                                                                    | Vehicles                                                                                               |                                            |         | 1,591             |        
|                                                                                                                                    | Office, furniture and equipment                                                                        |                                            |         | 11,766            |        
|                                                                                                                                    | Other                                                                                                  |                                            |         | 9,208             |        
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    |                                                                                                        |                                            | 188,410 |                   |        
|                                                                                                                                    | Less accumulated depreciation                                                                          |                                            |         | (71,746           | )      
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    |                                                                                                        | Net property, plant and equipment          |         |                   | 116,664
|Inventories for construction                                                                                                        |                                                                                                        |                                            | 3,522   |                   |        
|Intangible assets, net (note 3)                                                                                                     |                                                                                                        |                                            | 353,636 |                   |        
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    |                                                                                                        | Total assets                               |         | $                 | 483,463
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|LIABILITIES AND STOCKHOLDER'S EQUITY                                                                                                |                                                                                                        |                                            |         |                   |        
|Current liabilities:                                                                                                                |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    | Accounts payable and accrued expenses                                                                  |                                            | $       | 15,279            |        
|                                                                                                                                    | Accrued interest                                                                                       |                                            |         | 591               |        
|                                                                                                                                    | Deferred revenue                                                                                       |                                            |         | 2,826             |        
|                                                                                                                                    | Current portion of notes payable                                                                       |                                            |         | 113               |        
|                                                                                                                                    | Due to UPC Polska and its affiliates (note 2 and 6)                                                    |                                            |         | 52,130            |        
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    |                                                                                                        | Total current liabilities                  |         |                   | 70,939 
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|Long-term liabilities:                                                                                                              |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    | Notes payable and accrued interest to UPC Polska (note 6)                                              |                                            |         | 10,398            |        
|                                                                                                                                    | Notes payable (note 2)                                                                                 |                                            |         | 14,509            |        
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    |                                                                                                        | Total liabilities                          |         |                   | 95,846 
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|Redeemable preferred stock (liquidation value $60,000,000; 6,000 shares authorized, issued and outstanding)                         |                                                                                                        |                                            | 47,382  |                   |        
|Mandatorily Redeemable Debenture Stock, 30,000 shares authorized; 14,000 shares issued and outstanding (including accrued dividend) |                                                                                                        |                                            | 185,140 |                   |        
|Commitments and contingencies (note 9)                                                                                              |                                                                                                        |                                            |         |                   |        
|Stockholder's equity:                                                                                                               |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    | Common stock, $.01 par value; 27,000 shares authorized, 18,948 shares issued and outstanding           |                                            |         | 1                 |        
|                                                                                                                                    | Paid-in capital                                                                                        |                                            |         | 336,027           |        
|                                                                                                                                    | Accumulated other comprehensive loss                                                                   |                                            |         | (36,891           | )      
|                                                                                                                                    | Accumulated deficit                                                                                    |                                            |         | (144,042          | )      
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    |                                                                                                        | Total stockholder's equity                 |         |                   | 155,095
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        
|                                                                                                                                    |                                                                                                        | Total liabilities and stockholder's equity |         | $                 | 483,463
|                                                                                                                                    |                                                                                                        |                                            |         |                   |        

See accompanying notes to unaudited consolidated financial statements.

3

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POLAND COMMUNICATIONS, INC.  CONSOLIDATED STATEMENTS OF OPERATIONS  (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)  (UNAUDITED)

|                                               |                                                          | THREE MONTHS
ENDED
SEPTEMBER 30, |         | NINE MONTHS
ENDED
SPETEMBER 30, |  
|---------------------------------------------- | -------------------------------------------------------- | -------------------------------- | ------- | ------------------------------- | -
|
|Cable television revenue (note 6)              |                                                          | $                                | 18,616  |                                 | $
|Operating expenses:                            |                                                          |                                  |         |                                 |  
|                                               | Direct operating expenses charged by third parties       |                                  |         | 6,275                           |  
|                                               | Direct operating expenses charged by affiliates (note 6) |                                  |         | 3,622                           |  
|                                               | Selling, general and administrative expenses             |                                  |         | 3,534                           |  
|                                               | Depreciation and amortization                            |                                  |         | 7,075                           |  
|                                               |                                                          |                                  |         |                                 |  
|Total operating expenses                       |                                                          |                                  | 20,506  |                                 |  
|                                               |                                                          |                                  |         |                                 |  
|                                               | Operating loss                                           |                                  |         | (1,890                          | )
|Interest and investment income third party     |                                                          |                                  | 62      |                                 |  
|Interest expense third party                   |                                                          |                                  | (393    | )                               |  
|Interest expense UPC Polska (note 6)           |                                                          |                                  | (232    | )                               |  
|Non operating expense, net                     |                                                          |                                  | (179    | )                               |  
|Foreign exchange loss, net                     |                                                          |                                  | (1,952  | )                               |  
|                                               |                                                          |                                  |         |                                 |  
|                                               | Loss before income taxes                                 |                                  |         | (4,584                          | )
|Income tax expense                             |                                                          |                                  | (5      | )                               |  
|                                               |                                                          |                                  |         |                                 |  
|                                               | Net loss                                                 |                                  |         | (4,589                          | )
|Accretion of redeemable preferred stock        |                                                          |                                  | (1,324  | )                               |  
|Accrued dividend on Mandatorily Redeemable     |                                                          |                                  |         |                                 |  
|Debenture Stock                                |                                                          |                                  | (4,306  | )                               |  
|                                               |                                                          |                                  |         |                                 |  
|Net loss applicable to holders of common stock |                                                          | $                                | (10,219 | )                               | $
|                                               |                                                          |                                  |         |                                 |  
|Basic net loss per common share                |                                                          | $                                | (539.32 | )                               | $
|                                               |                                                          |                                  |         |                                 |  

See
accompanying notes to unaudited consolidated financial statements.

4

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POLAND COMMUNICATIONS, INC.  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS  (STATED IN THOUSANDS OF U.S. DOLLARS)  (UNAUDITED)

|                          |  | THREE MONTHS ENDED SEPTEMBER 30, |         | NINE MONTHS ENDED SEPTEMBER 30, |  
|------------------------- |  | -------------------------------- | ------- | ------------------------------- | -
|
|Net loss                  |  | $                                | (4,589  | )                               | $
|Other comprehensive loss: |  |                                  |         |                                 |  
|Translation adjustment    |  |                                  | (10,692 | )                               |  
|                          |  |                                  |         |                                 |  
|Comprehensive loss        |  | $                                | (15,281 | )                               | $
|                          |  |                                  |         |                                 |  

See
accompanying notes to unaudited consolidated financial statements.

5

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POLAND COMMUNICATIONS, INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS  (STATED IN THOUSANDS OF U.S. DOLLARS)  (UNAUDITED)

|                                                      |                                                                                 | NINE MONTHS ENDED
SEPTEMBER 30, 2002         |                                              | NINE MONTHS ENDED
SEPTEMBER 30, 2001                 |       
|----------------------------------------------------- | ------------------------------------------------------------------------------- | -------------------------------------------- | -------------------------------------------- | ---------------------------------------------------- | ------
|Cash flows from operating activities:                 |                                                                                 |                                              |                                              |                                                      |       
|                                                      | Net loss                                                                        |                                              | $                                            | (12,426                                              | )     
|                                                      | Adjustments to reconcile net loss to net cash provided by operating activities: |                                              |                                              |                                                      |       
|                                                      |                                                                                 | Depreciation and amortization                |                                              |                                                      | 21,522
|                                                      |                                                                                 | Unrealized foreign exchange losses           |                                              |                                                      | 3,814 
|                                                      |                                                                                 | Other                                        |                                              |                                                      | 81    
|                                                      |                                                                                 | Changes in operating assets and liabilities: |                                              |                                                      |       
|                                                      |                                                                                 |                                              | Accounts receivable                          |                                                      |       
|                                                      |                                                                                 |                                              | Other current assets                         |                                                      |       
|                                                      |                                                                                 |                                              | Accounts payable and accrued expenses        |                                                      |       
|                                                      |                                                                                 |                                              | Accrued interest                             |                                                      |       
|                                                      |                                                                                 |                                              | Amounts due to UPC Polska and its affiliates |                                                      |       
|                                                      |                                                                                 |                                              | Amounts due from affiliates                  |                                                      |       
|                                                      |                                                                                 |                                              | Deferred revenue                             |                                                      |       
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|                                                      |                                                                                 |                                              |                                              | Net cash provided by/(used in) operating activities  |       
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|Cash flows from investing activities:                 |                                                                                 |                                              |                                              |                                                      |       
|                                                      | Construction and purchase of property, plant and equipment                      |                                              |                                              | (3,239                                               | )     
|                                                      | Purchase of intangibles                                                         |                                              |                                              | (120                                                 | )     
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|                                                      |                                                                                 |                                              |                                              | Net cash used in investing activities                |       
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|Cash flows from financing activities:                 |                                                                                 |                                              |                                              |                                                      |       
|                                                      | Proceeds / (repayment) from parent, net                                         |                                              |                                              | (7,957                                               | )     
|                                                      | Repayment of notes payable                                                      |                                              |                                              | (326                                                 | )     
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|                                                      |                                                                                 |                                              |                                              | Net cash (used in)/ provided by financing activities |       
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|                                                      |                                                                                 |                                              |                                              | Net increase in cash and cash equivalents            |       
|Effect of exchange rates on cash and cash equivalents |                                                                                 |                                              | (124                                         | )                                                    |       
|Cash and cash equivalents at beginning of period      |                                                                                 |                                              | 3,210                                        |                                                      |       
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|Cash and cash equivalents at end of period            |                                                                                 | $                                            | 3,632                                        |                                                      | $     
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|Supplemental cash flow information:                   |                                                                                 |                                              |                                              |                                                      |       
|                                                      | Cash paid for interest                                                          |                                              | $                                            | 842                                                  |       
|                                                      |                                                                                 |                                              |                                              |                                                      |       
|                                                      | Cash paid for income taxes                                                      |                                              | $                                            | 45                                                   |       
|                                                      |                                                                                 |                                              |                                              |                                                      |       

See
accompanying notes to unaudited consolidated financial statements.

6

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POLAND COMMUNICATIONS, INC.  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002

1.    BASIS OF PRESENTATION; GENERAL

The information furnished by Poland Communications, Inc. and its subsidiaries ("PCI" or the "Company") has been prepared in accordance with accounting
principles generally accepted in the United States ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations. The Company maintains its books of accounts in
Poland, the Netherlands and in the United States of America in accordance with local accounting standards in the respective countries. These financial statements include all adjustments to the
Company's statutory books to present these statements in accordance with U.S. GAAP. The consolidated financial statements include the financial statements of PCI and its wholly owned and majority
owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated balance sheets, statements of operations, statements of
comprehensive loss and statements of cash flows are unaudited, but in the opinion of management, reflect all adjustments which are necessary for a fair statement of the Company's consolidated results
of operations and cash flows for the interim periods and the Company's financial position as of September 30, 2002. The accompanying unaudited consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 filed with the SEC (the "2001 Annual Report"). The interim financial results are not necessarily indicative of the results of the full year.

Management
of the Company believes that significant opportunities exist for cable television providers capable of delivering high quality, Polish-language programming on a multi-channel
basis and other services on cable (i.e. data and telephones). As such, the Company's current focus is on its cable television market. The Company's business strategy is designed to increase its
average revenue per subscriber and also, although to a lesser extent, to increase its subscriber base. The Company intends to achieve these goals by increasing penetration of new service products
within existing upgraded homes; providing additional revenue-generating services to existing customers, including internet services; refining the channel line up to the interests of existing
subscribers; improving the effectiveness of the
Company's sales and marketing efforts; reducing churn (customer disconnects); and increasing rates aggressively on broadcast packages.

The
Company also intends to increase the effectiveness of its operations and reduce its expenses by enhancing internal controls; improving corporate decision-making processes;
reorganizing the Company so as to simplify its legal and operational structure; and using local rather than expatriate employees in management, thereby reducing general and administrative costs.

2.    GOING CONCERN AND LIQUIDITY RISKS

These unaudited consolidated financial statements have been prepared on a going concern basis. Due to the large capital investment required for the construction
or acquisition of its cable networks and the administrative costs associated with commencing operations the Company has incurred substantial operating losses since inception.

The
Company relies solely on its parent UPC Polska, Inc. ("UPC Polska") for its sources of liquidity and financing, which relies solely on United Pan-Europe
Communications N.V. ("UPC") for its sources of liquidity and financing. The financial and liquidity problems experienced by UPC and UPC Polska, as described further below, have a significant impact on
the Company's ability to continue as a

7

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going concern. During 2001, UPC Polska reviewed its long-term plan for its operations and revised its business strategy for cable television from aggressive growth to a focus on
achievement of positive cash flow. UPC Polska and the Company have positive EBITDA (EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization) and positive cash flows
from operations in 2002.

On
February 1, 2002, May 1, 2002, August 1, 2002 and November 1, 2002 UPC failed to make required interest payments on its outstanding debt securities, which
caused potential cross default on certain other debt securities and loan agreements of UPC and its affiliates, including notes (the "Belmarken Notes") issued by UPC and Belmarken Holding B.V.
("Belmarken"). The events of default continue to exist on UPC's outstanding debt securities as of the date of filing of this Quarterly Report on Form 10-Q, although the holders of
such obligations have not yet accelerated the payment obligations of UPC with respect to such securities. UPC and its affiliates have obtained waivers to the potential cross defaults on their other
debt securities and loan agreements, which are subject to certain conditions.

On
September 30, 2002, UPC announced that it had entered into a restructuring agreement with its parent company, UnitedGlobalCom, Inc. ("United"), certain affiliates of
United and certain holders of UPC's outstanding debt securities. The restructuring agreement contains:



The
restructuring agreement may be terminated for a variety of reasons, including UPC's failure to make bankruptcy filings by December 31, 2002 or the lapse of a period of nine
months from the date the bankruptcy filings are made. To the Company's knowledge none of the termination events has occurred as of the date of the filing of this Quarterly Report on
Form 10-Q.

On
September 30, 2002, UPC also announced that it had received an extended waiver to its principal loan agreement. The extended waiver expires on the earlier of
(A) March 31, 2003 or (B) the occurrence of certain events, none of which, to the knowledge of the Company, has occurred as of the date of the filing of this Quarterly Report on
Form 10-Q.

Consummation
of the restructuring contemplated by the UPC's restructuring agreement is subject to various conditions. The Company cannot make any assurance that these conditions will be
satisfied or that the restructuring will be consummated. In addition, even if the restructuring agreement is consummated, there can be no assurance that UPC will be able to provide financing to UPC
Polska or that UPC Polska will be able to provide financing to the Company in the future.

Although
the Company had anticipated being able to rely on UPC Polska, which is relaying on UPC, to meet its payment obligations, given UPC's and UPC Polska's liquidity concerns, the
Company is not certain that it will receive the necessary (or any) financing from UPC Polska. If the Company is unable to rely on UPC Polska for financial support, it will have to meet its payment
obligations with cash on hand or with funds obtained from public or private debt or bank financing or any combination thereof, subject to the restrictions contained in the indentures governing the
outstanding indebtedness of the Company and if applicable, UPC Polska, UPC and United.

As
of September 30, 2002, PCI had negative working capital of $61.3 million and experienced operating losses of $1.9 million and $7.0 million for the three
and the nine months ended September 30, 2002 as compared to operating losses of $12.6 million and $37.9 for the three and the nine months ended September 30, 2001, respectively.
It also has significant commitments under

8

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operating leases and for programming rights, as well as repayment obligations related to PCI's 97/8% Senior Notes due 2003 (the "PCI Notes"). During the remainder of the year 2002, the
Company will be required to repay the remaining $0.1 million balance of the Bank Rozwoju facility (approximately $30,000 on a monthly basis). On November 1, 2003, the Company will also
be required to repay
approximately $14.5 million in principal amount under the PCI Notes and in December 2003 to redeem its mandatorily redeemable debenture stock of $140 million held by UPC Polska at
the issue price plus interest of 10% per annum compounded annually. It also has $52.1 million in trade payables due to UPC Polska and affiliates, which is classified as a current liability as
of September 30, 2002.

In
light of the foregoing payment obligations, PCI believes that the financial condition of UPC Polska is important to its own near and long term financial condition and liquidity.

As
of September 30, 2002, UPC Polska had negative working capital of $375.1 million and a stockholder's deficit of $340.3 million and had experienced operating
losses of $3.6 million and $12.7 million for the three and the nine months ended September 30, 2002 as compared to operating losses of $47.5 million and
$141.4 million for the three and the nine months ended September 30, 2001, respectively. UPC Polska has substantial repayment obligations on its indebtedness, including approximately
$430.2 million under its 141/2% Senior Discount Notes due 2008, Series C Discount Notes due 2008 and 141/2% Senior Discount Notes due 2009 (together, the
"UPC Polska Notes") and $452.5 million due to UPC and its affiliate (including accrued interest) as well as ongoing interest payments on such principal amounts.

As
of September 30, 2002, a significant amount of UPC Polska's unrestricted cash has limitations imposed on it by its indentures and notes payable to UPC and its affiliate. As a
result of these limitations and the potential inability of UPC to provide necessary funding, if required by UPC Polska, UPC Polska has limited sources of funding available to it outside of its
operating cash flows. There are various reasons UPC Polska could face substantial repayment obligations in the near term. As of September 30, 2002, UPC Polska had approximately
$6.0 million in outstanding notes payable to Reece Communications Inc. ("RCI"), a former stockholder of Poland Cablevision B.V. ("PCBV"). The note bears interest of 7% per annum and
matures in August 2003. UPC is the guarantor of the note. Since an event of default has occurred under UPC's indentures, which was not cured or waived within the applicable grace period, a
cross-default has occurred under the RCI note. As a result, RCI has the right to receive interest at the default rate of 12% per annum and accelerate the repayment of the note. Accordingly, in the UPC
Polska financial statements the entire outstanding balance of the note is recognized as a short-term liability.

As
a result of material adverse change provisions contained in the debt agreements between UPC and UPC Polska, the notes payable to UPC and its affiliates of $452.5 million
(including accrued interest) have been classified as current in the UPC Polska financial statements.

UPC
Polska's loan agreements with UPC and Belmarken contain various covenants and events of default which, among other things, permit UPC and Belmarken to accelerate the loans if a
continuing default exists under the Belmarken Notes, a default exists under indebtedness of UPC Polska or its subsidiaries which would permit or cause such indebtedness to be accelerated or if, in the
opinion of UPC, certain material adverse events or conditions relative to UPC Polska have occurred. Although potential cross defaults exist under UPC Polska loans owing to UPC and Belmarken as a
result of the potential defaults under the Belmarken Notes and the default under the RCI note, these potential defaults have been waived by the relevant holders. These waivers are effective
(i) until December 31,
2002 in the case of the RCI note and (ii) until the earlier of (A) March 31, 2003 or (B) the occurrence of certain events, none of which, to the knowledge of the Company,
has occurred as of the date of the filing of this Quarterly Report on Form 10-Q, in the case of the Belmarken Notes. Accordingly, UPC Polska loans payable to UPC and Belmarken have
been classified as short-term liabilities in UPC Polska's financial statements.

9

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In
the event any of UPC Polska's debt was accelerated as a result of a cross acceleration or another event of default, UPC Polska would have limited funds or available borrowings to
repay its obligations. In such circumstances UPC Polska's available cash on hand would be insufficient to satisfy all of its obligations, and UPC Polska cannot be certain that it would be able to
obtain the necessary financing at all, or on terms that will be favorable to UPC Polska.

Moreover,
if the Company's or UPC Polska's plans or assumptions change, if its assumptions prove inaccurate, if it experiences unexpected costs or competitive pressures, or if existing
cash and projected cash flow from operations prove to be insufficient, the Company and UPC Polska may need to obtain greater amounts of additional financing. While it is the Company's and UPC Polska's
intention to enter only into new financing or refinancing that it considers advantageous, there can be no assurance that such sources of financing would be available to the Company and UPC Polska in
the future, or, if available, that they could be obtained on terms acceptable to the Company and UPC Polska.

The
Company has experienced net losses since its formation. As of December 31, 2001, there was substantial uncertainty whether the Company's sources of capital, working capital
and projected operating cash flow would be sufficient to fund the Company's expenditures and service the Company's indebtedness over the next year. Accordingly, there is substantial doubt regarding
the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent on (i) the Company's parent's ability to restructure the UPC Polska Notes
and its loans payable to UPC and its affiliates, (ii) the Company's ability to generate the cash flows required to enable it to maintain the Company's assets and satisfy the Company's
liabilities, in the normal course of business, at the amounts stated in the consolidated financial statements. The report of the Company's former independent accountant, Arthur Andersen Sp. z o.o., on
the Company's consolidated financial statements for the year ended December 31, 2001, includes a paragraph that states that the Company has suffered recurring losses from operations and has a
negative working capital that raises substantial doubt about the Company's ability to continue as a going concern. Management of UPC Polska is currently evaluating various debt restructuring options
aimed at recapitalizing UPC Polska.

Several
of the Company's Polish subsidiaries have statutory shareholders' equity less than the legally prescribed limits because of accumulated losses. As required by Polish law, the
management of these companies will have to make decisions on how to increase the shareholders' equity to be in compliance with the Polish Commercial Code. The Company is currently considering several
alternatives, including the conversion of intercompany debt into equity, in order to resolve these deficiencies.

3.    GOODWILL AND OTHER INTANGIBLE ASSETS

On June 2, 1999, UPC Polska, the Company's parent, entered into an Agreement and Plan of Merger (the "Merger Agreement") with UPC, providing for UPC to
acquire (the "Acquisition") all of the outstanding shares of UPC Polska in an all cash transaction valuing UPC Polska's shares of common stock at $19.00 per share. In addition, UPC acquired 100% of
the outstanding Series A and Series B 12% Cumulative Preference Shares of UPC Polska and acquired all of the UPC Polska's outstanding warrants and stock options.

As
a result of the Acquisition, UPC revalued all of its previously existing goodwill, including amounts related to non-compete agreements that related to transactions
completed prior to Acquisition, and pushed down goodwill of approximately $979.3 million to UPC Polska establishing a new basis of accounting as of the acquisition date. The goodwill was
allocated between UPC Polska's business segments based on the investment model used for acquisition. The Company was allocated approximately $417.1 million of goodwill. During the years ended
December 31, 2000 and 2001 the Company's goodwill increased by $23.4 million to $440.5 million due to the purchase by an affiliate of

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the Company's parent of outstanding stock in Poland Cablevision (Netherlands) B.V. ("PCBV") from RCI, a former PCBV minority shareholder.

As
discussed in note 5, as of January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible
Assets" ("SFAS 142"). SFAS 142 requires that goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually (or more frequently if impairment
indicators are present) for impairment. The Company has completed the first step of goodwill impairment test required by SFAS 142 and determined that an indication of potential impairment of
goodwill exists. The Company is currently carrying out the second step of the test to quantify the amount of the impairment. It is possible that a substantial cumulative effect adjustment may be
required as a result of this process. As of September 30, 2002, net goodwill of approximately $350.6 million is included in the accompanying consolidated balance sheet. The consolidated
statements of operations for the three and nine months ended September 30, 2002 do not include any goodwill amortization expense. For the three and the nine months ended September 30,
2001, the consolidated statement of operations included amortization expense of approximately $6.4 million and $19.8 million, respectively.

4.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

Cash
and cash equivalents consist of cash and other short-term investments with original maturities of three months or less.

USE OF ESTIMATES

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting
period. The Company's actual results could differ from those estimates, which include, but are not limited to: allowance for doubtful accounts; impairment charges of long-lived assets and
revenue recognition.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The
allowance for doubtful accounts is based upon the Company's assessment of probable loss related to accounts receivable. Upon disconnection of the subscriber, all unpaid accounts
receivable from the subscriber are fully reserved. The allowance is maintained either until receipt of payment, or until the account is deemed uncollectable for a maximum of three years.

REVENUE RECOGNITION

Revenue
related to the provision of cable television and internet services to customers are recognized in the period in which the related services are provided in accordance with SFAS
No. 51 "Financial Reporting by Cable Television Companies" ("SFAS 51").

Initial
installation fees related to cable television and internet services are recognized as revenue in the period in which the installation occurs, to the extent installation fees are
equal to or less than direct selling costs, which are expensed. To the extent installation fees exceed direct selling costs, the excess fees are deferred and amortized over the average contract
period. However, due to regular promotional prices set-up for installation fees, the Company's direct selling costs exceed the associated gross installation revenue and accordingly the
Company did not report any deferred revenue on installations as of September 30, 2002 and December 31, 2001.

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TAXATION

Income
taxes are accounted for under the asset and liability method in accordance with SFAS 109, "Accounting for Income Taxes". Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and
tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled.

U.S.
TAXATIONPCI is subject to U.S. Federal taxation on its worldwide income. Polish companies that are not engaged in a trade or business within the U.S. or that do not
derive income from U.S. sources are not subject to U.S. income tax.

FOREIGN
TAXATIONPolish companies are subject to corporate income taxes, value added tax (VAT) and various local taxes within Poland, as well as import duties on materials
imported by them into Poland.

Income
tax for other foreign companies is calculated in accordance with tax regulations in effect in the respective countries. Due to differences between accounting practices under
Polish and other foreign tax regulations and those required by U.S. GAAP, certain income and expense items are recognized in different periods for financial reporting purposes and income tax reporting
purposes, which may result in deferred income tax assets and liabilities.

PROPERTY, PLANT AND EQUIPMENT

Property,
plant and equipment include assets used in the development and operation of the various cable distribution networks. During the period of construction, plant costs and a
portion of design, development and related overhead costs are capitalized as a component of the Company's investment in cable distribution networks.

The
Company capitalizes new subscriber installation costs, including material and labor of new connects or new service added to an existing location. Capitalized costs are depreciated
over a period similar to cable television plant. The costs of subsequently disconnecting and reconnecting the customer are expensed as incurred. Cable subscriber related costs and general and
administrative expenses are charged to operations when incurred.

When
material, the Company capitalizes interest costs incurred during the period of construction in accordance with SFAS No. 34, "Capitalization of Interest Cost". Interest is not
capitalized for short-term construction projects. During the nine months ended September 30, 2002 and 2001, no interest costs were capitalized.

Depreciation
is computed for financial reporting purposes using the straight-line method over the following estimated useful lives:

Cable system assets

10 yearsSet-top boxes

5 yearsVehicles

5 yearsOther property, plant and equipment

5 - 10 years


INVENTORIES FOR CONSTRUCTION

Inventories
for construction are stated at the lower of cost, determined by the average cost method, or net realizable value. Inventories are principally related to cable distribution
networks. Cost of inventory includes purchase price, transportation, customs and other direct costs.

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GOODWILL AND OTHER INTANGIBLES

Prior
to the Acquisition, goodwill, which represents the excess of purchase price over fair value of net assets acquired, was amortized on a straight-line basis over the
expected periods to be benefited, generally ten years, with the exception of amounts paid relating to non-compete agreements. The portion of the purchase price relating to
non-compete agreements was amortized over the term of the underlying agreements, generally five years.

Effective
as of the date of the Acquisition, August 6, 1999, the Company revalued all its previously existing goodwill, including amounts related to non-compete
agreements that related to transactions completed prior to the Acquisition. The goodwill that was pushed down to the Company was amortized on a straight-line basis over the expected
periods to be benefited, which is fifteen years.

In
July 2001, the Financial Accounting Standards Board issued SFAS 142, which the Company adopted effective January 1, 2002. Under SFAS 142, goodwill and
intangible assets with indefinite lives are no longer amortized, but are tested for impairment on an annual basis and whenever indicators of impairment arise. The goodwill impairment test, which is
based on fair value, is performed on a reporting unit level. All recognized intangible assets that are deemed not to have an indefinite life are amortized over their estimated useful lives.

The
Company is working with an external party to compare the fair value of the Company's reporting units with their respective carrying amounts, including goodwill. If the fair value of
a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, the second step of
the goodwill impairment test will be performed to measure the amount of impairment loss. The Company has completed the first step of the goodwill impairment test required by SFAS 142 and
determined that an indication of potential goodwill impairment exists. The Company is currently carrying out the second step of the test to quantify the amount of the impairment. It is possible that a
substantial cumulative effect adjustment may be required as a result of this process. As of September 30, 2002, net goodwill of approximately $350.6 million is included in the
accompanying consolidated balance sheets. The consolidated statement of operations for the three and nine months ended September 30, 2002 does not include any goodwill amortization expense. For
the three and nine months ended September 30, 2001, the consolidated statement of operations included such amortization expense of approximately $6.4 million and $19.8 million,
respectively.

The
following table presents the pro forma effect on net loss and basic net loss per common share from the reduction of amortization expense as a result of SFAS 142:

|                     |           | THREE MONTHS ENDED SEPTEMBER 30, |        | NINE MONTHS ENDED SEPTEMBER 30, |  
|-------------------- | --------- | -------------------------------- | ------ | ------------------------------- | -
|
|
|Net loss as reported |           | $                                | (4,589 | )                               | $
|                     | Add Back: |                                  |        |                                 |  
|                     |           | Goodwill amortization            |        |                                 | 
|                     |           |                                  |        |                                 |  
|Adjusted net loss    |           | $                                | (4,589 | )                               | $
|                     |           |                                  |        |                                 |  

|                                 |                                 | THREE MONTHS ENDED SEPTEMBER 30, |   | NINE MONTHS ENDED SEPTEMBER 30, |  
|-------------------------------- | ------------------------------- | -------------------------------- | - | ------------------------------- | -
|
|Basic net loss per common share: |                                 |                                  |   |                                 |  
|                                 | As reported                     |                                  | $ | (539.32                         | )
|                                 | Add back: Goodwill amortization |                                  |   |                                |  
|                                 |                                 |                                  |   |                                 |  
|                                 | Adjusted                        |                                  | $ | (539.32                         | )
|                                 |                                 |                                  |   |                                 |  

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Through
its subsidiaries, the Company has entered into lease agreements with the Polish national telephone company ("TPSA"), for the use of underground telephone conduits
for cable wiring. Costs related to obtaining conduit and franchise agreements with housing cooperatives and governmental authorities are capitalized and generally amortized over a period of ten years.
In the event the Company does not proceed to develop cable systems within designated cities, costs previously capitalized will be charged to expense.

In
July 2001, the Financial Accounting Standards Board issued SFAS No. 141,"Business Combinations" ("SFAS 141"), which was adopted effective July 1, 2001.
SFAS 141 requires the purchase method of accounting for all business combinations initiated after September 30, 2001. The Company has applied SFAS 141 to its only applicable
transaction the purchase of minority interests in PCBV on August 28, 2001.

STOCK-BASED COMPENSATION

The
Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"). Accordingly, the Company accounts for employee stock options and other stock-based awards using the intrinsic value method as outlined under APB Opinion No. 25, "Accounting
for Stock Issued to Employees", with proforma disclosure of net loss and loss per share as if the fair value method for expense recognition under SFAS 123 had been applied.

FOREIGN CURRENCIES

Foreign
currency transactions are recorded at the exchange rate prevailing at the date of the transactions. Assets and liabilities denominated in foreign currencies are translated at the
rates of exchange at the balance sheet date. Gains and losses on foreign currency transactions are included in the consolidated statement of operations.

The
financial statements of foreign subsidiaries are translated into U.S. dollars using (i) exchange rates in effect at period end for assets and liabilities, and
(ii) average exchange rates during the period for results of operations. Adjustments resulting from the translation of financial statements are reflected in accumulated other comprehensive
income/(loss) as a separate component of stockholder's equity. The Company considers all of its intercompany loans to its Polish subsidiaries to be of a long-term investment nature. As a
result, any foreign exchange gains or losses resulting from the intercompany loans are reported in accumulated other comprehensive loss as a separate component of stockholder's equity.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement
of Financial Accounting Standards No. 107, "Disclosures about Fair Value Of Financial Instruments" requires the Company to make disclosures of fair value information of
all financial instruments, whether or not recognized on the consolidated balance sheets, for which it is practicable to estimate fair value.

The
Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable, redeemable preferred stock, mandatorily redeemable debenture stock, accrued
expenses and notes payable. At September 30, 2002 and December 31, 2001, the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and
other current liabilities on the accompanying consolidated balance sheets approximates fair value due to the short maturity of these instruments.

At
September 30, 2002 and December 31, 2001, the carrying value of the redeemable preferred stock has been determined based upon the amount of future cash flows discounted
using the Company's estimated borrowing rate for similar instruments. It was not practicable to estimate the fair value of the redeemable preferred stock due to the fact that the instruments are
wholly owned by the Company's parent.

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At
September 30, 2002 and December 31, 2001, the fair value of the Company's notes payable balance approximated $14,622,000 and $14,916,000, respectively based on the last
trading price of the notes as of these dates. It was not practical to estimate the fair value of amounts due to UPC Polska and its affiliates and due from affiliates because of the nature of these
instruments, the circumstances surrounding their issuance, and the absence of quoted market prices for similar financial instruments. At the date of the Acquisition, the PCI Notes were restated to
their fair market value at this date. The resulting $1.6 million increase was recorded in the pushed-down purchased accounting entries.

IMPAIRMENT OF LONG-LIVED ASSETS

The
Company assesses the recoverability of long-lived assets (mainly property, plant and equipment, intangibles, and certain other assets) by determining whether the carrying
value of the asset can be recovered over the remaining life of the asset through projected undiscounted future operating cash flows expected to be generated by such asset. If impairment in value is
estimated to have occurred, the assets carrying value is reduced to its estimated fair value. The assessment of the recoverability of long-lived assets will be impacted if estimated future
operating cash flows are not achieved. Additionally if the Company's plans or assumptions change, if its assumptions prove inaccurate, if it experiences unexpected costs or competitive pressures, or
if existing cash and projected cash flow from operations
prove to be insufficient, the Company may need to impair certain of its long-lived assets. The Company is currently evaluating the potential impact the adoption of Statement of Financial
Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144") will have on the Company's financial position and results of
operations. As discussed in Note 5, as of the date of filing this Form 10-Q, the Company has not completed its evaluation of the impact of adopting SFAS 144. However,
management is aware that the adoption could result in material adjustments to its long-lived assets and its statement of operations during 2002.

ADVERTISING COSTS

All
advertising costs of the Company are expensed as incurred. The Company incurred advertising costs of approximately $145,000 and $1,138,000 for the three and the nine months ended
September 30, 2002 (including $36,000 and $179,000 in respect of internet operations, respectively) and $131,000 and $411,000 for the three and the nine months ended September 30, 2001.

5.    NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141"), which the Company adopted effective July 1, 2001. SFAS 141 requires the purchase method of accounting for all business combinations initiated after June 30,
2001. The Company has applied SFAS 141 to its only applicable transaction, the purchase of the minority interest in PCBV on August 28, 2001.

In
July 2001, the Financial Accounting Standards Board issued SFAS No. 142, which the Company adopted effective January 1, 2002. Under SFAS 142, goodwill and
intangible assets with indefinite lives are no longer amortized, but are tested for impairment on an annual basis and whenever indicators of impairment arise. The goodwill impairment test, which is
based on fair value, is performed on a reporting unit level. All recognized intangible assets that are deemed not to have an indefinite life are amortized over their estimated useful lives.

The
Company is working with an external party to compare the fair value of the Company's reporting units with their respective carrying amounts, including goodwill. If the fair value of
a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, the second step of
the goodwill impairment test will be performed to measure the amount of impairment loss. The Company has completed the first step of the goodwill impairment test required by SFAS 142 and
determined that an indication of potential goodwill impairment exists. The Company is currently carrying out the second

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step of the test to quantify the amount of impairment. It is possible that a substantial cumulative effect adjustment may be required as a result of this process.

As
of September 30, 2002, net goodwill of approximately $350.6 million is included in the accompanying consolidated balance sheets. The consolidated statement of operations
for the three and nine months ended September 30, 2002 does not include any goodwill amortization expense. For the three and nine months ended September 30, 2001, the consolidated
statement of operations included such amortization expense of approximately $6.4 million and $19.8 million, respectively.

In
August 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"). This statement addresses
the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 requires that
the fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset and reported as a liability. This statement is effective for fiscal years beginning after June 15, 2002.
The Company does not anticipate that the adoption of SFAS 143 will have a material impact on its financial position or results of operations.

In
August 2001, the Financial Accounting Standards Board issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), which is effective for fiscal periods beginning after December 15, 2001 and interim periods within those fiscal years. SFAS 144 establishes accounting and reporting
standards for impairment or disposal of long-lived assets and discontinued operations. The Company is currently evaluating the potential impact the adoption of SFAS 144 will have on
its financial position and results of operations. The Company expects it will have its SFAS 144 evaluation completed during the fourth quarter of 2002. At this point, management believes that
the adoption of SFAS 144 could result in material adjustments to its long-lived assets and its statement of operations during 2002.

In
April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145"). SFAS 145, which updates, clarifies and simplifies existing accounting pronouncements, addresses the
reporting of debt extinguishments and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The provisions of
SFAS 145 are generally effective for the Company's 2003 fiscal year, or in the case of specific provisions, for transactions occurring after May 15, 2002 or financial statements issued
on or after May 15, 2002. For certain provisions, including the rescission of Statement 4, early application is encouraged. The Company does not believe that the adoption of SFAS 145
will have a material impact on the Company's net loss, financial position or cash flows.

On
June 28, 2002 the Financial Accounting Standards Board voted in favor of issuing SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146").
SFAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force (EITF) has set forth in the EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The scope of SFAS 146 also includes (1) costs related to
terminating a contract that is not a capital lease and (2) termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual deferred compensation contract. SFAS 146 will be effective for financial statements issued for fiscal years beginning
after December 31, 2002. The Company has not yet determined the impact of SFAS 146 on its results of operations and financial position.

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6.    RELATED PARTY TRANSACTIONS

During the ordinary course of business, the Company enters into transactions with related parties. The principal related party transactions are described below.

CALL CENTER AND IT REVENUE

During
the year 2002 the Company provided certain call center services to Telewizyjna Korporacja Partycypacyjna S.A. ("TKP"), an affiliate of UPC Polska. The total revenue from these
services amounted to zero and $1,856,000 for the three and the nine months ended September 30, 2002, respectively.

Additionally,
during the nine month period ended September 30, 2002, the Company has provided to TKP certain IT services for subscriber data migration to TKP. The total revenue
from these services amounted to $26,000 and $247,000 for the three and the nine months ended September 30, 2002, respectively.

These
revenues were generated primarily in the first half of 2002 and the Company does not expect that any additional services will be provided to TKP to generate such revenue for the
remainder of 2002.

OTHER REVENUE

Commencing
April 2002, the Company has provided certain IT services relating to a subscribers management system to other Central European affiliates of UPC. The total revenue from
these services amounted to $129,000 and $410,000 for the three and the nine months ended September 30, 2002,
respectively. This revenue is earned on a "cost plus" basis and the Company expects to continue providing these services.

DIRECT OPERATING EXPENSES CHARGE BY AFFILIATES

Programming
has been provided to the Company by certain of its affiliates. The Company incurred programming fees from these affiliates of $3,039,000 and $8,715,000, for the three and the
nine months ended September 30, 2002 as compared to $5,382,000 and $17,537,000 for the three and the nine months ended September 30, 2001, respectively.

The
Company was also provided with Canal+ Multiplex programming by TKP. The total cost related to this service amounted $170,000 and $338,000 for the three and the nine months ended
September 30, 2002. There were no such costs in the three and the nine months ended September 30, 2001.

The
Company has incurred direct costs related to internet services from its affiliates amounting to $413,000 and $1,113,000 for the three and the nine months ended September 30,
2002 as compared to $304,000 and $568,000 for the three and the nine months ended September 30, 2001, respectively

INTEREST EXPENSE

The
Company incurred interest expense in relation to the loans payable to UPC Polska of $232,000, $691,000 for the three and the nine months ended September 30, 2002 as compared
to $232,000 and $689,000 for the three and the nine months ended September 30, 2001, respectively.

PAYABLES TO UPC POLSKA AND ITS AFFILIATES

All
amounts payable to UPC Polska and its affiliate relate to the reimbursement of actual expenses incurred (i.e. there were no amounts representing allocated expenses) mainly relating
to programming and internet expenses charged by affiliates. Additionally, the account includes interest free advances from UPC Polska in the amount of $11,478,000 and $19,435,000 as of
September 30, 2002 and December 31, 2001, respectively.

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NOTES PAYABLE TO UPC POLSKA

As
of September 30, 2002 and December 31, 2001, the Company had a loan payable to UPC Polska of approximately $10,398,000 and $9,706,000, respectively. The amounts include
accrued interest of approximately $2,798,000 and $2,107,000 as of September 30, 2002 and December 31, 2001, respectively. The loan bears interest at the rate of 12% per annum and matures
on August 1, 2004.

7.    RECLASSIFICATIONS

Certain amounts have been reclassified in the corresponding period's unaudited consolidated financial statement to conform to the unaudited consolidated financial
statement presentation for the three and the nine months ended September 30, 2002.

8.    PER SHARE INFORMATION

Basic loss per common share is based on the weighted average number of common shares outstanding of 18,948 for three and the nine months periods ended
September 30, 2002 and 2001.

9.    COMMITMENTS AND CONTINGENCIES

BUILDING LEASE

The
Company leases several offices and warehouses within Poland under cancelable operating leases. The future minimum lease payments as of September 30, 2002 are $622,000 in 2002,
$1,428,000 in 2003, $1,304,000 in 2004, $1,297,000 in 2005 and $516,000 in 2006.

CONDUIT LEASES

The
Company also leases space within various telephone duct systems from TPSA under cancelable operating leases. The TPSA leases expire at various times, and a substantial portion of the
Company's
contracts with TPSA permit termination by TPSA without penalty at any time either immediately upon the occurrence of certain conditions or upon provision of three to nine months notice without cause.

In
addition, some conduit agreements with TPSA provide that cables can be installed in the conduit only for the use of cable television. If the Company uses the cables for a purpose
other than cable television, such as data transmission, telephone, or Internet access, such use could be considered a violation of the terms of certain conduit agreements, unless this use is expressly
authorized by TPSA. There is no guarantee that TPSA would give its approval to permit other uses of the conduits. The Company is currently in the process of providing Internet services to its cable
customers in certain of its markets.

Minimum
future lease commitments for the aforementioned conduit leases relate to 2002 and 2003 only, as all leases are cancelable in accordance with the aforementioned terms. The future
minimum lease commitments related to these conduit leases approximates $1,097,000 as of September 30, 2002.

PROGRAMMING COMMITMENTS

The
Company has entered into long-term programming agreements and agreements for the purchase of certain exhibition or broadcast rights with a number of third party and
affiliated content providers for its cable systems. The agreements have terms, which range from one to twenty years and require that the license fees be paid either at a fixed amount (guaranteed
minimum) payable at the time of execution or based upon an actual number of subscribers connected to the system each month. As of September 30, 2002, the Company had an aggregate minimum
commitment in relation to fixed obligations resulting from these agreements of approximately $62,457,000 over the next sixteen years, approximating $1,204,000 in 2002, $4,791,000 in 2003, $4,974,000
in 2004, $3,063,000 in 2005, zero in 2006 and $48,425,000 in aggregate for all years after 2006. In addition the Company has a variable obligation in relation to these agreements, which is based on
the actual number of subscribers in the month for which the fee is due.

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REGULATORY FRAMEWORK

The
Company is in possession of all valid telecommunication permits, a considerable number of which were issued in 2001 for a 10 year period. If there is a necessity of renewal,
the Company applies to the President of the Office for Telecommunications and Post Regulation ("URTiP"). Historically, the Company has not experienced difficulties in obtaining such renewals and
believes it will continue to receive such renewals in the normal course of business.

The
Polish Parliament voted on October 28, 2002 to remove the statutory license from the copyright law effective January 1, 2003, subject to formal signature by the
President of Poland. The full effect of this potential change is unclear however it may result in an obligation for cable operators to have all agreements with broadcaster and copyright associations
in place by January 1, 2003. Its effects on the copyright fees paid by cable operators is also uncertain as a new copyright law, currently under review, is due to be passed in 2003.

The
statutory license has been used so far by all cable operators in Poland to retransmit domestic and foreign free-to-air (FTA) channels without formal
agreements with the broadcasters, primarily Polish channels (TVP, Polsat, TVN) and a number of foreign FTAs (e.g. German channels).

LITIGATION AND CLAIMS

From
time to time, the Company is subject to various claims and suits arising out of the ordinary course of business. While the ultimate result of all such matters is not presently
determinable, based upon current knowledge and facts, management does not expect that their resolution will have a material adverse effect on the Company's consolidated financial position or results
of operations.

HBO ARBITRATION

The
Company and its parent is involved in a dispute with Polska Programming B.V. ("HBO") concerning its cable carriage agreement ("Cable Agreement") for the HBO premium movie channel.
With respect to the Cable Agreement, on April 25, 2002, the Company and its parent commenced an arbitration proceeding before the International Chamber of Commerce, claiming that HBO was in
breach of the "most favored nations" clause thereunder ("MFN") by providing programming to other cable operators in the relevant Territory on terms that are more favorable than those offered to the
Company. Specifically, the Company contends that its "Service Fee" under the Cable Agreement should not include any minimum guarantees because such minimum guarantees are not required of other cable
operators in the Territory.

In
its answer in the arbitration, HBO asserted counterclaims against the Company, alleging that it was liable for minimum guarantees under the Cable Agreement. The Company responded to
the counterclaims by denying that it owes any sums for minimum guarantees under the Cable Agreement, in light of the MFN clause. The Company intends to vigorously prosecute its claims and defend
against HBO's counterclaims. Given that the actual number of future cable subscribers is unknown, the Company is unable to estimate the extent of any financial impact, if any, on the Company should
HBO prevail on its cable counterclaim.

19

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POLAND CABLEVISION (NETHERLANDS) B.V.  CONSOLIDATED BALANCE SHEETS  (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                       |                                                                                                        | SEPTEMBER 30,
2002                         |         | DECEMBER 31,
2001 |        
|-------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------- | ----------------- | -------
|
|ASSETS                                 |                                                                                                        |                                            |         |                   |        
|Current assets:                        |                                                                                                        |                                            |         |                   |        
|                                       | Cash and cash equivalents                                                                              |                                            | $       | 3,517             |        
|                                       | Trade accounts receivable, net of allowance for doubtful accounts of $3,291 in 2002 and $2,733 in 2001 |                                            |         | 5,319             |        
|                                       | Prepayments                                                                                            |                                            |         | 544               |        
|                                       | Due from affiliates                                                                                    |                                            |         | 67                |        
|                                       | Other current assets                                                                                   |                                            |         | 78                |        
|                                       |                                                                                                        |                                            |         |                   |        
|                                       |                                                                                                        | Total current assets                       |         |                   | 9,525  
|                                       |                                                                                                        |                                            |         |                   |        
|Property, plant and equipment:         |                                                                                                        |                                            |         |                   |        
|                                       | Cable system assets                                                                                    |                                            |         | 131,861           |        
|                                       | Construction in progress                                                                               |                                            |         | 780               |        
|                                       | Vehicles                                                                                               |                                            |         | 1,434             |        
|                                       | Office, furniture and equipment                                                                        |                                            |         | 11,258            |        
|                                       | Other                                                                                                  |                                            |         | 8,253             |        
|                                       |                                                                                                        |                                            |         |                   |        
|                                       |                                                                                                        |                                            | 153,586 |                   |        
|                                       | Less accumulated depreciation                                                                          |                                            |         | (58,325           | )      
|                                       |                                                                                                        |                                            |         |                   |        
|                                       |                                                                                                        | Net property, plant and equipment          |         |                   | 95,261 
|Inventories for construction           |                                                                                                        |                                            | 3,507   |                   |        
|Intangible assets, net (note 3)        |                                                                                                        |                                            | 310,669 |                   |        
|                                       |                                                                                                        |                                            |         |                   |        
|                                       |                                                                                                        | Total assets                               |         | $                 | 418,962
|                                       |                                                                                                        |                                            |         |                   |        
|LIABILITIES AND STOCKHOLDER'S EQUITY   |                                                                                                        |                                            |         |                   |        
|Current liabilities:                   |                                                                                                        |                                            |         |                   |        
|                                       | Accounts payable and accrued expenses                                                                  |                                            | $       | 14,203            |        
|                                       | Deferred revenue                                                                                       |                                            |         | 2,735             |        
|                                       | Notes payable and accrued interest to PCI (note 6)                                                     |                                            |         | 254,945           |        
|                                       | Due to PCI and UPC Polska and affiliates                                                               |                                            |         | 69,557            |        
|                                       |                                                                                                        |                                            |         |                   |        
|                                       |                                                                                                        | Total current liabilities                  |         |                   | 341,440
|                                       |                                                                                                        |                                            |         |                   |        
|Commitments and contingencies (note 9) |                                                                                                        |                                            |         |                   |        
|                                       | Minority Interest                                                                                      |                                            |         | 237               |        
|Stockholders' equity:                  |                                                                                                        |                                            |         |                   |        
|                                       | Capital stock $0.50 par value; 200,000 shares authorized, issued and outstanding                       |                                            |         | 100               |        
|                                       | Paid-in capital                                                                                        |                                            |         | 288,124           |        
|                                       | Accumulated other comprehensive loss                                                                   |                                            |         | (33,205           | )      
|                                       | Accumulated deficit                                                                                    |                                            |         | (177,734          | )      
|                                       |                                                                                                        |                                            |         |                   |        
|                                       |                                                                                                        | Total stockholders' equity                 |         |                   | 77,285 
|                                       |                                                                                                        |                                            |         |                   |        
|                                       |                                                                                                        | Total liabilities and stockholders' equity |         | $                 | 418,962
|                                       |                                                                                                        |                                            |         |                   |        

See
accompanying notes to unaudited consolidated financial statements.

20

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POLAND CABLEVISION (NETHERLANDS) B.V.  CONSOLIDATED STATEMENTS OF OPERATIONS  (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)  (UNAUDITED)

|                                     |                                                          | THREE MONTHS ENDED SEPTEMBER 30,         |        | NINE MONTHS ENDED SEPTEMBER 30, |       
|------------------------------------ | -------------------------------------------------------- | ---------------------------------------- | ------ | ------------------------------- | ------
|
|Cable television revenue (note 6)    |                                                          | $                                        | 18,513 |                                 | $     
|Operating expenses:                  |                                                          |                                          |        |                                 |       
|                                     | Direct operating expenses charged by third parties       |                                          |        | 6,273                           |       
|                                     | Direct operating expenses charged by affiliates (note 6) |                                          |        | 4,757                           |       
|                                     | Selling, general and administrative expenses             |                                          |        | 3,527                           |       
|                                     | Depreciation and amortization                            |                                          |        | 5,981                           |       
|                                     |                                                          |                                          |        |                                 |       
|                                     |                                                          | Total operating expenses                 |        |                                 | 20,538
|                                     |                                                          |                                          |        |                                 |       
|                                     |                                                          | Operating loss                           |        |                                 | (2,025
|Interest income, third party         |                                                          |                                          | 46     |                                 |       
|Interest expense, third party        |                                                          |                                          | (26    | )                               |       
|Interest expense, PCI (note 6)       |                                                          |                                          | (4,598 | )                               |       
|Non operating expense, net           |                                                          |                                          | (174   | )                               |       
|Foreign exchange loss, net           |                                                          |                                          | (1,500 | )                               |       
|                                     |                                                          |                                          |        |                                 |       
|                                     |                                                          | Loss before income taxes                 |        |                                 | (8,277
|Minority interest in subsidiary loss |                                                          |                                          | 21     |                                 |       
|Income tax expense                   |                                                          |                                          |       |                                 |       
|                                     |                                                          |                                          |        |                                 |       
|                                     |                                                          | Net loss (note 4)                        |        | $                               | (8,256
|                                     |                                                          |                                          |        |                                 |       
|                                     |                                                          | Basic net loss per common share (note 4) |        | $                               | (41.28
|                                     |                                                          |                                          |        |                                 |       

See
accompanying notes to unaudited consolidated financial statements.

21

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POLAND CABLEVISION (NETHERLANDS) B.V.  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS  (STATED IN THOUSANDS OF U.S. DOLLARS)  (UNAUDITED)

|                          |                                   | THREE MONTHS ENDED SEPTEMBER 30, |         | NINE MONTHS ENDED SEPTEMBER 30, |  
|------------------------- | --------------------------------- | -------------------------------- | ------- | ------------------------------- | -
|
|Net loss                  |                                   | $                                | (8,256  | )                               | $
|Other comprehensive loss: |                                   |                                  |         |                                 |  
|                          | Cumulative translation adjustment |                                  |         | (9,492                          | )
|                          |                                   |                                  |         |                                 |  
|Comprehensive loss        |                                   | $                                | (17,748 | )                               | $
|                          |                                   |                                  |         |                                 |  

See
accompanying notes to unaudited consolidated financial statements.

22

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POLAND CABLEVISION (NETHERLANDS) B.V.  CONSOLIDATED STATEMENTS OF CASH FLOWS  (STATED IN THOUSANDS OF U.S. DOLLARS)  (UNAUDITED)

|                                      |                                                                                 | NINE MONTHS ENDED
SEPTEMBER 30, 2002           |                                      | NINE MONTHS ENDED
SEPTEMBER 30, 2001                |       
|------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------ | --------------------------------------------------- | ------
|Cash flows from operating activities: |                                                                                 |                                                |                                      |                                                     |       
|                                      | Net loss                                                                        |                                                | $                                    | (23,938                                             | )     
|                                      | Adjustments to reconcile net loss to net cash provided by operating activities: |                                                |                                      |                                                     |       
|                                      |                                                                                 | Minority interest                              |                                      |                                                     | (48   
|                                      |                                                                                 | Depreciation and amortization                  |                                      |                                                     | 18,191
|                                      |                                                                                 | Interest expense added to notes payable to PCI |                                      |                                                     | 13,645
|                                      |                                                                                 | Unrealized foreign exchange losses             |                                      |                                                     | 3,113 
|                                      |                                                                                 | Other                                          |                                      |                                                     | 61    
|                                      |                                                                                 | Changes in operating assets and liabilities:   |                                      |                                                     |       
|                                      |                                                                                 |                                                | Accounts receivable                  |                                                     |       
|                                      |                                                                                 |                                                | Other current assets                 |                                                     |       
|                                      |                                                                                 |                                                | Accounts payable                     |                                                     |       
|                                      |                                                                                 |                                                | Deferred revenue                     |                                                     |       
|                                      |                                                                                 |                                                | Amounts due to affiliates and parent |                                                     |       
|                                      |                                                                                 |                                                | Amounts due from UPC affiliates      |                                                     |       
|                                      |                                                                                 |                                                |                                      |                                                     |       
|                                      |                                                                                 |                                                |                                      | Net cash provided by/(used in) operating activities |       
|                                      |                                                                                 |                                                |                                      |                                                     |       
|Cash flows from investing activities: |                                                                                 |                                                |                                      |                                                     |       
|                                      | Construction and purchase of property, plant and equipment                      |                                                |                                      | (3,203                                              | )     
|                                      | Purchase of intangible assets                                                   |                                                |                                      | (120                                                | )     
|                                      |                                                                                 |                                                |                                      |                                                     |       
|                                      |                                                                                 |                                                |                                      | Net cash used in investing activities               |       
|                                      |                                                                                 |                                                |                                      |                                                     |       
|Cash flows from financing activities: |                                                                                 |                                                |                                      |                                                     |       
|                                      | Proceeds/(repayment) from parent, net                                           |                                                |                                      | (8,463                                              | )     
|                                      |                                                                                 |                                                |                                      |                                                     |       
|                                      |                                                                                 |                                                |                                      | Net cash provided by/(used in) financing activities |       
|                                      |                                                                                 |                                                |                                      |                                                     |       
|                                      |                                                                                 |                                                |                                      | Net increase in cash                                |       
|                                      | Effect of exchange rates on cash and cash equivalents                           |                                                |                                      | (122                                                | )     
|                                      | Cash and cash equivalents at beginning of the period                            |                                                |                                      | 2,933                                               |       
|                                      |                                                                                 |                                                |                                      |                                                     |       
|                                      | Cash and cash equivalents at end of the period                                  |                                                | $                                    | 3,517                                               |       
|                                      |                                                                                 |                                                |                                      |                                                     |       
|                                      | Supplemental cash flow information:                                             |                                                |                                      |                                                     |       
|                                      |                                                                                 | Cash paid for interest                         |                                      | $                                                   | 90    
|                                      |                                                                                 |                                                |                                      |                                                     |       
|                                      |                                                                                 | Cash paid for income taxes                     |                                      | $                                                   | 36    
|                                      |                                                                                 |                                                |                                      |                                                     |       

See
accompanying notes to unaudited consolidated financial statements.

23

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POLAND CABLEVISION (NETHERLANDS) B.V.  NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002

1.    BASIS OF PRESENTATION; GENERAL

Financial information is included for Poland Cablevision (Netherlands) B.V. and its subsidiaries ("PCBV" or the "Company") as PCBV is a guarantor of Poland
Communications, Inc., ("PCI") 97/8% Senior Notes due 2003 (the "PCI Notes"). The information furnished by PCBV has been prepared in accordance with generally accepted accounting
principles in the United States ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). The Company maintains its books of accounts in Poland and the Netherlands
in accordance with local accounting standards in the respective countries. These financial statements include all adjustments to the Company's statutory books to present these statements in accordance
with U.S. GAAP. The consolidated financial statements include the financial statements of PCBV and its wholly owned and majority owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. The accompanying consolidated balance sheets, statements of operations, statements of comprehensive loss and statements of cash flows are unaudited,
but in the opinion of management, reflect all adjustments which are necessary for a fair statement of the Company's consolidated results of operations and cash flows for the interim periods and the
Company's financial position as of September 30, 2002. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and the notes thereto included in the Company's parent's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 filed with the SEC (the "2001
Annual Report"). The interim financial results are not necessarily indicative of the results of the full year.

Management
of the Company believes that significant opportunities exist for cable television providers capable of delivering high quality, Polish-language programming on a multi-channel
basis and other services on cable (i.e. data and telephones). As such, the Company's current focus is on its cable television market. The Company's business strategy is designed to increase its
average revenue per subscriber and also, although to a lesser extent, to increase its subscriber base. The Company intends to achieve these goals by increasing penetration of new service products
within existing upgraded homes; providing additional revenue-generating services to existing customers, including internet services; refining the channel line up to the interests of existing
subscribers; improving the effectiveness of the
Company's sales and marketing efforts; reducing churn (customer disconnects); and increasing rates aggressively on broadcast packages.

The
Company also intends to increase the effectiveness of its operations and reduce its expenses by enhancing internal controls; improving corporate decision-making processes;
reorganizing the Company so as to simplify its legal structure; and using local rather than expatriate employees in management, thereby reducing general and administrative costs.

2.    GOING CONCERN AND LIQUIDITY RISKS

These unaudited consolidated financial statements have been prepared on a going concern basis. Due to the large capital investment required for the construction
or acquisition of its cable networks and the administrative costs associated with commencing operations the Company has incurred substantial operating losses since inception.

The
Company relies solely on PCI, which relies solely on UPC Polska, Inc. ("UPC Polska") and United Pan-Europe Communications N.V ("UPC") for its sources of liquidity
and financing. The financial and liquidity problems experienced by PCI, UPC and UPC Polska, as described further below, have a significant impact on the Company's ability to continue as a going
concern. During 2001, UPC

24

---

Polska reviewed its long-term plan for its operations and revised its business strategy for cable television from aggressive growth to a focus on achievement of positive cash flow. UPC
Polska and the Company have positive EBITDA (EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization) and positive cash flows from operations in 2002.

On
February 1, 2002, May 1, 2002, August 1, 2002 and November 1, 2002 UPC failed to make required interest payments on its outstanding debt securities, which
caused potential cross default on certain other debt securities and loan agreements of UPC and its affiliates, including notes (the "Belmarken Notes") issued by UPC and Belmarken Holding B.V.
("Belmarken"). The events of default continue to exist on UPC's outstanding debt securities as of the date of filing of this Quarterly Report on Form 10-Q, although the holders of
such obligations have not yet accelerated the payment obligations of UPC with respect to such securities. UPC and its affiliates have obtained waivers to the potential cross defaults on their other
debt securities and loan agreements, which are subject to certain conditions.

On
September 30, 2002, UPC announced that it had entered into a restructuring agreement with its parent company, UnitedGlobalCom, Inc. ("United"), certain affiliates of
United and certain holders of UPC's outstanding debt securities. The restructuring agreement contains:



The
restructuring agreement may be terminated for a variety of reasons, including UPC's failure to make bankruptcy filings by December 31, 2002 or the lapse of a period of nine
months from the date the bankruptcy filings are made. To the Company's knowledge none of the termination events has occurred as of the date of the filing of this Quarterly Report on
Form 10-Q.

On
September 30, 2002, UPC also announced that it had received an extended waiver to its principal loan agreement. The extended waiver expires on the earlier of
(A) March 31, 2003 or (B) the occurrence of certain events, none of which, to the knowledge of the Company, has occurred as of the date of the filing of this Quarterly Report on
Form 10-Q.

Consummation
of the restructuring contemplated by the UPC's restructuring agreement is subject to various conditions. The Company cannot make any assurance that these conditions will be
satisfied or that the restructuring will be consummated. In addition, even if the restructuring agreement is consummated, there can be no assurance that UPC will be able to provide financing to UPC
Polska or that UPC Polska will be able to provide financing to PCI and to the Company in the future.

Although
the Company had anticipated being able to rely on PCI and UPC Polska, which are relaying on UPC, to meet their payment obligations, given UPC, UPC Polska and PCI liquidity
concerns, the Company is not certain that it will receive the necessary financing from its parent. If the Company is unable to rely on the parent and UPC Polska for financial support, it will have to
meet its payment obligations with cash on hand or with funds obtained from public or private debt or bank financing or any combination thereof, subject to the restrictions contained in the indentures
governing the outstanding senior indebtedness of the Company's parent and, if applicable, of UPC Polska, UPC and United.

As
of September 30, 2002, the Company had negative working capital of $331.9 million and has experienced operating losses of $2.0 million and $7.1 million for
the three and the nine months ended September 30, 2002 as compared to $12.3 million and $35.6 million for the three and the nine months

25

---

ended September 30, 2001, respectively. It also has significant commitments under operating leases and for programming rights, as well as the notes and accrued interest due to PCI of
$254.9 million, which are due on demand.

In
light of the foregoing payment obligations, PCBV believes that the financial condition of UPC Polska and PCI is important to its own near and long term financial condition and
liquidity.

As
of September 30, 2002, PCI has negative working capital of $61.3 million and has experienced operating losses of $1.9 million and $7.0 million for the
three and the nine months ended September 30, 2002 as compared to $12.6 million and $37.9 million for the three and the nine months ended September 30, 2001, respectively.
It also has significant commitments under operating leases and for programming rights, as well as repayment obligations related to the PCI Notes. During the remainder of the year 2002, PCI will be
required to repay the remaining $0.1 million balance of the Bank Rozwoju facility. On November 1, 2003, PCI will also be required to repay approximately $14.5 million in principal
amount under the PCI Notes and in December 2003 to redeem its mandatorily redeemable debenture stock of $140 million held by UPC Polska at the issue price plus interest of 10% per annum
compounded annually. It also has $52.1 million in trade payables due to UPC Polska and affiliates, which is classified as current liability as of September 30, 2002.

As
of September 30, 2002, UPC Polska had negative working capital of $375.1 million and a stockholder's deficit of $340.3 million and had experienced operating
losses of $3.6 million and $12.7 million for the three and the nine months ended September 30, 2002 as compared to operating losses of $47.5 million and
$141.4 million for the three and the nine months ended September 30, 2001, respectively. UPC Polska has substantial repayment obligations on its indebtedness, including approximately
$430.2 million under and 141/2% Senior Discount Notes due 2008, Series C Discount Notes due 2008 and 141/2% Senior Discount Notes due 2009 (together, the
"UPC Polska Notes") and $452.5 million due to UPC and its affiliates (including accrued interest) as well as ongoing interest payments on such principal amounts.

As
of September 30, 2002, a significant amount of UPC Polska's unrestricted cash has limitations imposed on it by its indentures and notes payable to UPC and its affiliates. As a
result of these limitations and the potential inability of UPC to provide necessary funding, if required by UPC Polska, UPC Polska has limited sources of funding available to it outside of its
operating cash flows. There are various reasons UPC Polska could face substantial repayment obligations in the near term. As of September 30, 2002 UPC Polska had approximately
$6.0 million in outstanding notes payable to Reece Communications, Inc. ("RCI"), a former stockholder of PCBV. The note bears an interest of 7% per annum and matures in
August 2003. UPC is the guarantor of the note. Since an event of default has occurred under UPC's indentures, which was not cured or waived within the applicable grace period, a cross-default
has occurred under the RCI note. As a result, RCI has the right to receive the interest at the default rate of 12% per annum and accelerate the repayment of the note. Accordingly, in the UPC Polska
financial statements the entire outstanding balance of the note is recognized as a short-term liability.

As
a result of material adverse change provisions contained in the debt agreements between UPC and UPC Polska, the notes payable to UPC and its affiliates of $452.5 million
(including accrued interest) have been classified as current in the UPC Polska financial statements.

UPC
Polska's loan agreements with UPC and Belmarken contain various covenants and events of default which, among other things, permit UPC and Belmarken to accelerate the loans if a
continuing default exists under the Belmarken Notes, a default exists under indebtedness of UPC Polska or its subsidiaries which would permit or cause such indebtedness to be accelerated or if, in the
opinion of UPC, certain material adverse events or conditions relative to UPC Polska have occurred. Although potential cross defaults exist under UPC Polska loans owing to UPC and Belmarken as a
result of the potential defaults under the Belmarken Notes and the defaults under the RCI note, these potential

26

---

defaults have been waived by the relevant holders. These waivers are effective (i) until December 31, 2002 in the case of the RCI note and (ii) until the earlier of
(A) March 31, 2003 or (B) the occurrence of certain events, none of which, to the knowledge of the Company, has occurred as of the date of the filing of this Quarterly Report on
Form 10-Q, in the case of the Belmarken Notes. Accordingly, UPC Polska loans payable to UPC and Belmarken have been classified as short-term liabilities in UPC Polska's
financial statements.

In
the event any of UPC Polska's debt was accelerated as a result of a cross acceleration or another event of default, UPC Polska would have limited funds or available borrowings to
repay its obligations. In such circumstances UPC Polska's available cash on hand would be insufficient to satisfy all of its obligations, and UPC Polska cannot be certain that it would be able to
obtain the necessary financing at all, or on terms that will be favorable to UPC Polska.

Moreover,
if the Company's, PCI's or UPC Polska's plans or assumptions change, if its assumptions prove inaccurate, if it experiences unexpected costs or competitive pressures, or if
existing cash and projected cash flow from operations prove to be insufficient, the Company, PCI or UPC Polska may need to obtain greater amounts of additional financing. While it is the Company's,
PCI's or UPC Polska's intention to enter only into new financing or refinancing that it considers advantageous, there can be no assurance that such sources of financing would be available to the
Company, PCI or UPC Polska in the future, or, if available, that they could be obtained on terms acceptable to the Company, PCI or UPC Polska.

The
Company has experienced net losses since its formation. As of December 31, 2001, there was substantial uncertainty whether the Company's sources of capital, working capital
and projected operating cash flow would be sufficient to fund the Company's expenditures and service the Company's indebtedness over the next year. Accordingly, there is substantial doubt regarding
the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent on (i) UPC Polska's ability to restructure the UPC Polska Notes and its
loans payable to UPC and its affiliates (ii) the Company's ability to generate the cash flows required to enable it to maintain the Company's assets and satisfy the Company's liabilities, in
the normal course of business, at the amounts stated in the consolidated financial statements. The report of the Company's former independent accountant, Arthur Andersen Sp. z o.o., on the Company's
consolidated financial statements for the year ended December 31, 2001, includes a paragraph that states that the Company has suffered recurring losses from operations and has a negative
working capital that raises substantial doubt about the Company's ability to continue as a going concern. Management of UPC Polska is currently evaluating various debt restructuring options aimed at
recapitalizing UPC Polska.

Several
of the Company's Polish subsidiaries have statutory shareholders' equity less than the legally prescribed limits because of accumulated losses. As required by Polish law, the
management of these companies will have to make decisions on how to increase the shareholders' equity to be in compliance with the Polish Commercial Code. The Company is currently considering several
alternatives, including the conversion of intercompany debt into equity, in order to resolve these deficiencies.

3.    GOODWILL AND OTHER INTANGIBLE ASSETS

PCBV is a majority owned-subsidiary of PCI, and PCI is entirely owned by UPC Polska. On June 2, 1999, UPC Polska entered into an Agreement and Plan of
Merger (the "Merger Agreement") with UPC, providing for UPC to acquire (the "Acquisition") all of the outstanding shares of UPC Polska in an all cash transaction valuing UPC Polska's shares of common
stock at $19.00 per share. In addition, UPC acquired 100% of the outstanding Series A and Series B 12% Cumulative Preference Shares of UPC Polska and acquired all of the outstanding
warrants and stock options.

27

---

As
a result of the Acquisition UPC revalued all of its previously existing goodwill, including amounts related to non-compete agreements that related to transactions
completed prior to Acquisition, and pushed down goodwill of approximately $979.3 million to UPC Polska establishing a new basis of accounting as of the acquisition date. The goodwill was
allocated between the UPC Polska's business segments based on the investment model used for acquisition. PCBV was allocated approximately $354.0 million of goodwill. During the years ended
December 31, 2000 and 2001 the Company's goodwill increased by $23.4 million to $377.4 million due to the purchase by an affiliate of UPC Polska of outstanding stock from PCBV's
minority shareholders.

As
discussed in note 5, as of January 1, 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible
Assets" ("SFAS 142"). SFAS 142 requires that goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually (or more frequently if impairment
indicators are present) for impairment. The Company has completed the first step required by SFAS 142 and determined that an indication of potential impairment of goodwill exists. The Company
is currently carrying out the second step of the test to quantify the amount of the impairment. It is possible that a substantial cumulative effect adjustment may be required as a result of this
process. The consolidated statements of operations for the three and nine months ended September 30, 2002 do not include any goodwill amortization expense. For the three and the nine months
ended September 30, 2001, the consolidated statement of operations included amortization expense of approximately $5.8 million and $17.8 million, respectively.

4.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

Cash
and cash equivalents consist of cash and other short-term investments with original maturities of three months or less.

USE OF ESTIMATES

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the reporting
period. The Company's actual results could differ from those estimates, which include, but are not limited to: allowance for doubtful accounts; impairment charges of long-lived assets and
revenue recognition.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The
allowance for doubtful accounts is based upon the Company's assessment of probable loss related to accounts receivable. Upon disconnection of the subscriber, all unpaid accounts
receivable from the subscriber are fully reserved. The allowance is maintained either until receipt of payment, or until the account is deemed uncollectable for a maximum of three years.

REVENUE RECOGNITION

Revenue
related to the provision of cable television and internet services to customers are recognized in the period in which the related services are provided in accordance with SFAS
No. 51 "Financial Reporting by Cable Television Companies" ("SFAS 51").

Initial
installation fees related to cable television and internet services are recognized as revenue in the period in which the installation occurs, to the extent installation fees are
equal to or less than direct selling costs, which are expensed. To the extent installation fees exceed direct selling costs, the excess fees are deferred and amortized over the average contract
period. However, due to regular

28

---

promotional prices set up for installation fees, the Company's direct selling costs exceed the associated gross installation revenue and accordingly the Company did not report any deferred revenue on
installations as of September 30, 2002 and December 31, 2001.

TAXATION

Income
taxes are accounted for under the asset and liability method in accordance with SFAS 109, "Accounting for Income Taxes". Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and
tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled.

Netherlands TaxationThe income tax treaty currently in force between the Netherlands and the United States provides that the
Netherlands may impose a withholding tax at a maximum of 5% on dividends paid by PCBV to its stockholders.

Foreign TaxationPolish companies are subject to corporate income taxes, value added tax (VAT) and various local taxes within
Poland, as well as import duties on materials imported by them into Poland.

Due
to differences between accounting practices under Foreign tax regulations and those required by U.S. GAAP, certain income and expense items are recognized in different periods for
financial reporting purposes and income tax reporting purposes, which may result in deferred income tax assets and liabilities.

PROPERTY, PLANT AND EQUIPMENT

Property,
plant and equipment include assets used in the development and operation of the various cable distribution networks. During the period of construction, plant costs and a
portion of design, development and related overhead costs are capitalized as a component of the Company's investment in cable distribution networks.

The
Company capitalizes new subscriber installation costs, including material and labor of new connects or new service added to an existing location. Capitalized costs are depreciated
over a period similar to cable television plant. The costs of subsequently disconnecting and reconnecting the customer are
expensed as incurred. Cable subscriber related costs and general and administrative expenses are charged to operations when incurred.

When
material, the Company capitalizes interest costs incurred during the period of construction in accordance with SFAS No. 34, "Capitalization of Interest Cost". Interest is not
capitalized for short-term construction projects. During the nine months ended September 30, 2002 and 2001, no interest costs were capitalized.

Depreciation
is computed for financial reporting purposes using the straight-line method over the following estimated useful lives:

Cable system assets

10 yearsSet-top boxes

5 yearsVehicles

5 yearsOther property, plant and equipment

5 - 10 years


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INVENTORIES FOR CONSTRUCTION

Inventories
for construction are stated at the lower of cost, determined by the average cost method, or net realizable value. Inventories are principally related to cable distribution
networks. Cost of inventory includes purchase price, transportation, customs and other direct costs.

GOODWILL AND OTHER INTANGIBLES

Prior
to the Acquisition, goodwill, which represents the excess of purchase price over fair value of net assets acquired, was amortized on a straight-line basis over the
expected periods to be benefited, generally ten years, with the exception of amounts paid relating to non-compete agreements. The
portion of the purchase price relating to non-compete agreements was amortized over the term of the underlying agreements, generally five years.

Effective
as of the date of the Acquisition, August 6, 1999, the Company revalued all its previously existing goodwill, including amounts related to non-compete
agreements that related to transactions completed prior to the Acquisition. The goodwill that was pushed down to the Company was amortized on a straight-line basis over the expected
periods to be benefited, which is fifteen years.

In
July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS 142"), which the Company adopted effective January 1, 2002. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized, but are tested for
impairment on an annual basis and whenever indicators of impairment arise. The goodwill impairment test, which is based on fair value, is performed on a reporting unit level. All recognized intangible
assets that are deemed not to have an indefinite life are amortized over their estimated useful lives.

The
Company is working with an external party to compare the fair value of the Company's reporting units with their respective carrying amounts, including goodwill. If the fair value of
a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, the second step of
the goodwill impairment test will be performed to measure the amount of impairment loss. The Company has completed the first step of the goodwill impairment test required by SFAS 142 and
determined that an indication of potential goodwill impairment exists. The Company is currently carrying out the second step of the test to quantify the amount of the impairment. It is possible that a
substantial cumulative effect adjustment may be required as a result of this process. As of September 30, 2002, net goodwill of approximately $307.6 million is included in the
accompanying consolidated balance sheets. The consolidated statement of operations for the three and nine months ended September 30, 2002 does not include any goodwill amortization expense. For
the three and nine months ended September 30, 2001, the consolidated statement of operations included such amortization expense of approximately $5.8 million and $17.9 million,
respectively.

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The
following table presents the pro forma effect on net loss and basic net loss per common share from the reduction of amortization expense as a result of SFAS 142:

|                     |           | THREE MONTHS ENDED SEPTEMBER 30, |        | NINE MONTHS ENDED SEPTEMBER 30, |  
|-------------------- | --------- | -------------------------------- | ------ | ------------------------------- | -
|
|
|Net loss as reported |           | $                                | (8,256 | )                               | $
|                     | Add Back: |                                  |        |                                 |  
|                     |           | Goodwill amortization            |        |                                 | 
|                     |           |                                  |        |                                 |  
|Adjusted net loss    |           | $                                | (8,256 | )                               | $
|                     |           |                                  |        |                                 |  

|                                 |                                 | THREE MONTHS ENDED SEPTEMBER 30, |   | NINE MONTHS ENDED SEPTEMBER 30, |  
|-------------------------------- | ------------------------------- | -------------------------------- | - | ------------------------------- | -
|
|Basic net loss per common share: |                                 |                                  |   |                                 |  
|                                 | As reported                     |                                  | $ | (41.28                          | )
|                                 | Add back: Goodwill amortization |                                  |   |                                |  
|                                 |                                 |                                  |   |                                 |  
|                                 | Adjusted                        |                                  | $ | (41.28                          | )
|                                 |                                 |                                  |   |                                 |  

Through
its subsidiaries, the Company has entered into lease agreements with the Polish national telephone company ("TPSA"), for the use of underground telephone conduits for cable
wiring. Costs related to obtaining conduit and franchise agreements with housing cooperatives and governmental authorities are capitalized and generally amortized over a period of ten years. In the
event the Company does not proceed to develop cable systems within designated cities, costs previously capitalized will be charged to expense.

In
July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" ("SFAS 141"), which was adopted effective July 1, 2001.
SFAS 141 requires the purchase method of accounting for all business combinations initiated after June 30, 2001. The Company has applied SFAS 141 to its only applicable
transaction the purchase of minority interests in PCBV on August 28, 2001.

FOREIGN CURRENCIES

Foreign
currency transactions are recorded at the exchange rate prevailing at the date of the transactions. Assets and liabilities denominated in foreign currencies are translated at the
rates of exchange at the balance sheet date. Gains and losses on foreign currency transactions are included in the consolidated statement of operations.

The
financial statements of foreign subsidiaries are translated into U.S. dollars using (i) exchange rates in effect at period end for assets and liabilities, and
(ii) average exchange rates during the period for results of operations. Adjustments resulting from the translation of financial statements are reflected in accumulated other comprehensive
income/(loss) as a separate component of stockholder's equity. The Company considers all of its intercompany loans to its Polish subsidiaries to be of a long-term investment nature. As a
result, any foreign exchange gains or losses resulting from the intercompany loans are reported in accumulated other comprehensive loss as a separate component of stockholder's equity.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement
of Financial Accounting Standards No. 107, "Disclosures about Fair Value Of Financial Instruments" requires the Company to make disclosures of fair value information of
all financial instruments, whether or not recognized on the consolidated balance sheets, for which it is practicable to estimate fair value.

The
Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and notes payable. At September 30, 2002 and
December 31, 2001, the carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and other current liabilities on the accompanying consolidated
balance sheets approximates fair value due to the short maturity of these instruments.

IMPAIRMENT OF LONG-LIVED ASSETS

The
Company assesses the recoverability of long-lived assets (mainly property, plant and equipment, intangibles, and certain other assets) by determining whether the carrying
value of the asset can be recovered over the remaining life of the asset through projected undiscounted future operating cash flows expected to be generated by such asset. If impairment in value is
estimated to have occurred, the assets carrying value is reduced to its estimated fair value. The assessment of the recoverability of long-lived assets will be impacted if estimated future
operating cash flows are not achieved. Additionally if the Company's plans or assumptions change, if its assumptions prove inaccurate, if it experiences unexpected costs or competitive pressures, or
if existing cash and projected cash flow from operations prove to be insufficient, the Company may need to impair certain of its long-lived assets. The Company is currently evaluating the
potential impact the adoption of Statement of Financial Accounting Standards No 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144") will have on the
Company's financial position and results of operations. As discussed in note 5, as of the date of filing this Form 10-Q, the Company has not completed its evaluation of the
impact of adopting SFAS 144. However, management is aware that the adoption could result in material adjustments to its long-lived assets and its statement of operations during
2002.

ADVERTISING COSTS

All
advertising costs of the Company are expensed as incurred. The Company incurred advertising costs of approximately $145,000 and $1,138,000 for the three and the nine months ended
September 30, 2002 (including $36,000 and $179,000 in respect of internet operations, respectively) and $131,000 and $411,000 for the three and the nine months ended September 30, 2001.

5.    NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141"), which the Company adopted effective July 1, 2001. SFAS 141 requires the purchase method of accounting for all business combinations initiated after June 30,
2001. The Company has applied SFAS 141 to its only applicable transaction, the purchase of the minority interest in PCBV on August 28, 2001.

In
July 2001, the Financial Accounting Standards Board issued SFAS No. 142, which the Company adopted effective January 1, 2002. Under SFAS 142, goodwill and
intangible assets with indefinite lives are no longer amortized, but are tested for impairment on an annual basis and whenever indicators of impairment arise. The goodwill impairment test, which is
based on fair value, is performed on a reporting unit level. All recognized intangible assets that are deemed not to have an indefinite life are amortized over their estimated useful lives.

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The
Company is working with an external party to compare the fair value of the Company's reporting units with their respective carrying amounts, including goodwill. If the fair value of
a reporting unit exceeds its carrying amount, the goodwill of the reporting unit is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, the second step of
the goodwill impairment test will be performed to measure the amount of impairment loss. The Company has completed the first step of the goodwill impairment test required by SFAS 142 and
determined that an indication of potential goodwill impairment exists. The Company is currently carrying out the second step of the test to quantify the amount of impairment. It is possible that a
substantial cumulative effect adjustment may be required as a result of this process.

As
of September 30, 2002, net goodwill of approximately $307.6 million is included in the accompanying consolidated balance sheets. The consolidated statement of operations
for the three and nine months ended September 30, 2002 does not include any goodwill amortization expense. For the three and the nine months ended September 30, 2001, the consolidated
statement of operations included amortization expense of approximately $5.8 million and $17.8 million, respectively.

In
August 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"). This statement addresses
the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS 143 requires that
the fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset and reported as a liability. This statement is effective for fiscal years beginning after June 15, 2002.
The Company does not anticipate that the adoption of SFAS 143 will have a material impact on its financial position or results of operations.

In
August 2001, the Financial Accounting Standards Board issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), which is effective for fiscal periods beginning after December 15, 2001 and interim periods within those fiscal years. SFAS 144 establishes accounting and reporting
standards for impairment or disposal of long-lived assets and discontinued operations. The Company is currently evaluating the potential impact the adoption of SFAS 144 will have on
its financial position and results of operations. The Company expects it will have its SFAS 144 evaluation completed during the fourth quarter of 2002. At this point, management believes that
the
adoption of SFAS 144 could result in material adjustments to its long-lived assets and its statement of operations during 2002.

In
April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145"). SFAS 145, which updates, clarifies and simplifies existing accounting pronouncements, addresses the
reporting of debt extinguishments and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The provisions of
SFAS 145 are generally effective for the Company's 2003 fiscal year, or in the case of specific provisions, for transactions occurring after May 15, 2002 or financial statements issued
on or after May 15, 2002. For certain provisions, including the rescission of Statement 4, early application is encouraged. The Company does not believe that the adoption of SFAS 145
will have a material impact on the Company's net loss, financial position or cash flows.

On
June 28, 2002 the Financial Accounting Standards Board voted in favor of issuing SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146").
SFAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force (EITF) has set forth in the EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity

33

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(including Certain Costs Incurred in a Restructuring)". The scope of SFAS 146 also includes (1) costs related to terminating a contract that is not a capital lease and
(2) termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an
individual deferred compensation contract. SFAS 146 will be effective for financial statements issued for fiscal years beginning after December 31, 2002. The Company has not yet
determined the impact of SFAS 146 on its results of operations and financial position.

6.    RELATED PARTY TRANSACTIONS

During the ordinary course of business, the Company enters into transactions with related parties. The principal related party transactions are described below.

CALL CENTER REVENUE

During
the year 2002, the Company provided certain call center services to Telewizyjna Korporacja Partycypacyjna S.A. ("TKP"), an affiliate of UPC Polska, until June 30, 2002. The
total revenue from these services amounted to zero and $1,856,000 for the three and the nine months ended September 30, 2002, respectively.

Additionally,
during the nine month period ended September 30, 2002, the Company has provided to TKP certain IT services for subscriber data migration to TKP. The total revenue
from these services amounted to $26,000 and $247,000 for the three and the nine months ended September 30, 2002, respectively.

These
revenues were generated primarily in first half of 2002 and the Company does not expect that any additional services will be provided to TKP to generate such revenue for the
remainder of 2002.

OTHER REVENUE

Commencing
April 2002, the Company has provided certain IT services relating to a subscribers management system to other Central European affiliates of UPC. The total revenue from
these services amounted to $129,000 and $410,000 for the three and the nine months ended September 30, 2002, respectively. This revenue is earned on a "cost plus" basis and the Company expects
to continue providing these services.

DIRECT OPERATING EXPENSES CHARGE BY AFFILIATES

Programming
has been provided to the Company by certain of its affiliates. The Company incurred programming fees from these affiliates of $3,039,000 and $8,715,000, for the three and the
nine months ended September 30, 2002 as compared to $5,236,000 and $16,858,000 for the three and the nine months ended September 30, 2001, respectively.

The
Company was also provided with Canal+ Multiplex programming by TKP. The total cost related to this service amounted $170,000 and $338,000 for the three and the nine months ended
September 30, 2002. There were no such costs in the three and the nine months ended September 30, 2001.

The
Company was charged by PCI with $1,135,000 and $3,384,000 for the three and the nine months ended September 30, 2002 as compared to $833,000 and $2,506,000 for the three and
the nine months ended September 30, 2001, respectively, in relation to cable network lease.

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The
Company has incurred direct costs related to internet services from its affiliates amounting to $413,000 and $1,113,000 for the three and the nine months ended September 30,
2002 as compared to $304,000 and $568,000 for the three and the nine months ended September 30, 2001, respectively

INTEREST EXPENSE

During
the three and the nine months ended September 30, 2002, the Company incurred interest expense in relation to the loans payable to PCI of $4,598,000 and $13,645,000 as
compared to $4,199,000 and $12,551,000 for the three and the nine months ended September 30, 2001, respectively.

NOTES PAYABLE TO PCI

As
of September 30, 2002 and December 31, 2001, the Company had loans payable to PCI of approximately $254,945,000 and $249,765,000, respectively. The amounts include
accrued interest of approximately $75,165,000 and $70,053,000 as of September 30, 2002 and December 31, 2001, respectively. The loan bears interest at the rate of 10% per annum.

7.    RECLASSIFICATIONS

Certain amounts have been reclassified in the corresponding period's unaudited consolidated financial statements to conform to the unaudited consolidated
financial statement presentation for the three and the nine months ended September 30, 2002.

8.    PER SHARE INFORMATION

Basic loss per common share is based on the weighted average number of common shares outstanding of 200,000 for the three and the nine months ended
September 30, 2002 and 2001.

9.    COMMITMENTS AND CONTINGENCIES

BUILDING LEASE

The
Company leases several offices and warehouses within Poland under cancelable operating leases. The future minimum lease payments as of September 30, 2002 are $621,000 in 2002,
$1,428,000 in 2003, $1,304,000 in 2004, $1,297,000 in 2005 and $516,000 in 2006 and thereafter.

CONDUIT LEASES

The
Company also leases space within various telephone duct systems from TPSA under cancelable operating leases. The TPSA leases expire at various times, and a substantial portion of the
Company's contracts with TPSA permit termination by TPSA without penalty at any time either immediately upon the occurrence of certain conditions or upon provision of three to nine months notice
without cause.

In
addition, some conduit agreements with TPSA provide that cables can be installed in the conduit only for the use of cable television. If the Company uses the cables for a purpose
other than cable television, such as data transmission, telephone, or Internet access, such use could be considered a violation of the terms of certain conduit agreements, unless this use is expressly
authorized by TPSA. There is no guarantee that TPSA would give its approval to permit other uses of the conduits. The Company is currently in the process of providing Internet services to its cable
customers in certain of its markets.

Minimum
future lease commitments for the aforementioned conduit leases relate to 2002 and 2003 only, as all leases are cancelable in accordance with the aforementioned terms. The future
minimum lease commitments related to these conduit leases approximates $1,097,000 as of September 30, 2002.

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PROGRAMMING COMMITMENTS

The
Company has entered into long-term programming agreements and agreements for the purchase of certain exhibition or broadcast rights with a number of third party and
affiliated content providers for its cable systems. The agreements have terms, which range from one to twenty years and require that the license fees be paid either at a fixed amount (guaranteed
minimum) payable at the time of execution or based upon an actual number of subscribers connected to the system each month. As of September 30, 2002, the Company had an aggregate minimum
commitment in relation to fixed obligations resulting from these agreements of approximately $62,457,000 over the next sixteen years, approximating $1,204,000 in 2002, $4,791,000 in 2003, $4,974,000
in 2004, $3,063,000 in 2005, zero in
2006 and $48,425,000 in aggregate for all years after 2006. In addition the Company has a variable obligation in relation to these agreements, which is based on the actual number of subscribers in the
month for which the fee is due.

REGULATORY FRAMEWORK

The
Company is in possession of all valid telecommunication permits, a considerable number of which were issued in 2001 for a 10 year period. If there is a necessity of renewal,
the Company applies to the President of the Office for Telecommunications and Post Regulation ("URTiP"). Historically, the Company has not experienced difficulties in obtaining such renewals and
believes it will continue to receive such renewals in the normal course of business.

The
Polish Parliament voted on October 28, 2002 to remove the statutory license from the copyright law effective January 1, 2003, subject to formal signature by the
President of Poland. The full effect of this potential change is unclear however it may result in an obligation for cable operators to have all agreements with broadcaster and copyright associations
in place by January 1, 2003. Its effects on the copyright fees paid by cable operators is also uncertain as a new copyright law, currently under review, is due to be passed in 2003.

The
statutory license has been used so far by all cable operators in Poland to retransmit domestic and foreign free -to-air (FTA) channels without formal
agreements with the broadcasters, primarily Polish channels (TVP, Polsat, TVN) and a number of foreign FTA's (e.g. German channels).

LITIGATION AND CLAIMS

From
time to time, the Company is subject to various claims and suits arising out of the ordinary course of business. While the ultimate result of all such matters is not presently
determinable, based upon current knowledge and facts, management does not expect that their resolution will have a material adverse effect on the Company's consolidated financial position or results
of operations.

HBO ARBITRATION

The
Company and its parent is involved in a dispute with Polska Programming B.V. ("HBO") concerning its cable carriage agreement ("Cable Agreement") for the HBO premium movie channel.
With respect to the Cable Agreement, on April 25, 2002, the Company and its parent commenced an arbitration proceeding before the International Chamber of Commerce, claiming that HBO was in
breach of the "most favored nations" clause thereunder ("MFN") by providing programming to other cable operators in the relevant Territory on terms that are more favorable than those offered to the
Company. Specifically, the Company contends that its "Service Fee" under the Cable Agreement should not include any minimum guarantees because such minimum guarantees are not required of other cable
operators in the Territory.

In
its answer in the arbitration, HBO asserted counterclaims against the Company, alleging that it was liable for minimum guarantees under the Cable Agreement. The Company responded to
the counterclaims by denying that it owes any sums for minimum guarantees under the Cable Agreement, in light of the MFN clause. The Company intends to vigorously prosecute its claims and defend
against HBO's counterclaims. Given that the actual number of future cable subscribers is unknown, the Company is unable to estimate the extent of any financial impact, if any, on the Company should
HBO prevail on its cable counterclaim.

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

The
following discussion and analysis provides information concerning the results of operations and financial condition of Poland Communication, Inc. ("PCI" or the "Company").
Such discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements of the Company. Additionally, the following discussion and analysis should
be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the audited consolidated financial statements included in Part II of the
Company's 2001 Annual Report filed on Form 10-K. The following discussion focuses on material trends, risks and uncertainties affecting the results of operations and financial
condition of the Company.

Certain
statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995, that are not historical facts but rather reflect the Company's current expectations concerning future results and events. The words "believes", "expects", "intends", "plans", "anticipates",
"likely", "will", "may", "shall" and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of the Company (or entities in which the Company has interests), or industry results, to differ materially from future results,
performance or achievements expressed or implied by such forward-looking statements.

Readers
are cautioned not to place undue reliance on these forward looking statements which reflect management's view only as of the date of this Quarterly Report on
Form 10-Q. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated events, conditions or circumstances.

The
risks, uncertainties and other factors that might cause such differences include, but are not limited to:



37

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The
report of the Company's former independent accountants, Arthur Andersen Sp. z o.o., on the Company's consolidated financial statements for the year ended December 31, 2001,
includes a paragraph that states that the Company has suffered recurring losses from operations and has a negative working capital that raises substantial doubt about its ability to continue as a
going concern.
The Company's management's plans in regard to these matters are described in the note 2 to the consolidated financial statements contained in this Quarterly Report on
Form 10-Q. The Company's consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might result, should the Company be unable to continue as a going concern. Investors in the Company should review carefully the report of Arthur Andersen Sp. z
o.o. There can be no assurance the Company will be able to continue as a going concern.

OVERVIEW

The
Company operates one of the largest cable television systems in Poland with approximately 1,865,800 homes passed and approximately 986,400 total subscribers as at
September 30, 2002. The Company's overall revenue has remained at a similar level of $18.6 million for the three months ended September 30, 2001 and 2002, but increased by
$1.2 million from $57.5 million to $58.7 million for the nine months ended September 30, 2001 and 2002, respectively.

During
2001, the Company reviewed its business strategy. The Company's principal objective under its new strategy is for its business to become cash flow positive in 2002. It also
focuses on enhancing its position, as a leading provider of cable television in Poland by capitalizing on favorable opportunities that it believes exists in Poland.

The
Company's business strategy is designed to increase its average revenue per subscriber, and also, although to a lesser extent, to increase its subscriber base.

The
Company intends to achieve these goals by:



The
Company also intends to increase the effectiveness of its operations and reduce its expenses by:



The
Company's revenues have been and will continue to be derived primarily from monthly subscription fees for cable television services. The Company charges its subscribers fixed monthly
fees

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for their choice of service packages and for other services, such as premium channels, tuner rentals and additional outlets, all of which are included in monthly subscription fees. The Company
currently offers broadcast, intermediate (in limited areas) and basic packages of cable service. At September 30, 2002, approximately 62.2% of the Company's subscribers received its basic
package. The individual subscriber receiving basic package is charged, in average, a monthly subscription fee of $9.90 (including 22% VAT). For the nine months ended September 30, 2002,
approximately 94.5% of the Company's revenue was derived from monthly subscription fees. For the nine months ended September 30, 2001, 97.7% of the Company's revenue in its cable segment was
derived from monthly subscription fees.

The
Company also provides Internet services to its customers. Although the Company does not currently invest in development of this service, it intends to expand its internet service
offering in the future. Revenue of $1.0 million and $2.8 million for the three and the nine months ended September 30, 2002 as compared to $0.4 million and
$0.9 million for the corresponding periods in 2001 was attributable to the Company's Internet services. Individual and home office internet subscribers are charged a
standard monthly subscription fee of $43.20 and $53.50, respectively, for internet and cable TV services combined (rates as of September 30, 2002, including 7% VAT on internet service part).
The standard installation fee is approximately $59.00 for existing cable customers and approximately $71.10 for new customers (rates as of September 30, 2002, including 22% VAT). However, the
Company frequently offers promotional installation fee at the nominal price of approximately $0.20.

The
Company has implemented a pricing strategy designed to increase revenue per subscriber and thus its profit margin. For an additional monthly charge, certain of the Company's cable
networks in 2001 have offered two premium television services, HBO Poland and Wizja Sport. From March 2001 until December 2001 Wizja Sport was included in the basic service package. In
December 2001 Wizja Sport ceased operation. In connection with the merger of UPC Polska's digital satellite direct-to-home, or "D-DTH", business with the
D-DTH and premium pay television business of a company controlled by Group Canal+ S.A. ("Canal+"), in February 2002, Canal+ Multiplex began to be distributed across the Company's
network. The Company, UPC Polska and Telewizyjna Korporacja Partycypacyjna S.A. ("TKP") are currently negotiating the definitive long-form channel carriage agreement for distribution of
Canal+ Multiplex. The Company currently offers HBO Poland and Canal+ Multiplex for approximately $8.40 and $9.40 per month, respectively (rates as of September 30, 2002, including 22% VAT). The
Company also offers these channels as a package at approximately $14.20 per month (rates as of September 30, 2002, including 22% VAT).

The
Company divides operating expenses into (i) direct operating expenses, (ii) selling, general and administrative expenses and (iii) depreciation and amortization
expenses. Direct operating expenses consist of programming expenses, maintenance and related expenses necessary to service, maintain and operate the Company's cable systems, billing and collection
expenses and customer service expenses. Selling, general and administrative expenses consist principally of administrative costs, including office related expenses, professional fees and salaries,
wages and benefits of non-technical employees, advertising and marketing expenses, bank fees and bad debt expense. Depreciation and amortization expenses consist of depreciation of
property, plant and equipment and amortization of intangible assets.

In
addition to other operating statistics, the Company measures its financial performance by EBITDA, an acronym for earnings before interest, taxes, depreciation and amortization. The
Company defines EBITDA to be net loss adjusted for interest and investment income, depreciation and amortization, interest expense, foreign exchange gains or losses, income tax expense and non
operating income or expense. The items excluded from EBITDA are significant components in understanding and assessing the Company's financial performance. The Company and industry analysts believe
that EBITDA and related measures of cash flow from operating activities serve as important financial indicators in measuring and comparing the operating performance of media companies.

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EBITDA
is not a U.S. GAAP measure of profit and loss or cash flow from operations and should not be considered as an alternative to net income, cash flows or any other measure of
performance or liquidity under generally accepted accounting principles, or as an indicator of a company's operating performance. The presentation of EBITDA may not be comparable to statistics with
the same or a
similar name reported by other companies. Not all companies and analysts calculate EBITDA in the same manner.

The
Company reported positive EBITDA of $5.2 million and $14.5 million for three and the nine months ended September 30, 2002 and negative EBIDTA of
$0.1 million for the three months ended September 30, 2001 and positive EBIDTA of $2.0 million the nine months ended September 30, 2001.

CRITICAL ACCOUNTING POLICIES

The
discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the
reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from
these estimates under different assumptions or conditions.

Critical
accounting policies are defined as those that are reflective of significant judgments and uncertainties, which would potentially result in materially different results under
different assumptions and conditions. For a detailed discussion on the application of critical accounting policies and other accounting policies, see note 4 "Summary of Significant Accounting
Policies" in the notes to the unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q and the Management' Discussion and Analysis of Financial
Condition and Results of Operations section of the Company's 2001 Annual Report on Form 10-K.

RESULTS OF OPERATIONS

REVENUE.
Revenue remained on a similar level of $18.6 million in the three months ended September 30, 2001 and 2002 respectively, but increased $1.2 million or 2.1%
from $57.5 million in the nine months ended September 30, 2001 to $58.7 million in the nine months ended September 30, 2002. The consistent three-month and increased
nine-month revenues were attributable to a number of factors. Revenue from internet subscriptions increased from $0.4 million for the three months ended September 30, 2001 to
$1.0 million for the three months ended September 30, 2002 and from $0.9 million for the nine months ended September 30, 2001 to $2.8 million for the nine months
ended September 30, 2002. This increase was partially offset by a decrease in the number of basic subscribers. In addition, during the nine months ended September 30, 2002, the Company
obtained revenue of $2.1 million from certain call center services, such as billing and subscriber support and IT services, provided to TKP. There were no such revenues generated during 2001
and the Company does not expect that any additional services will be provided to TKP to generate such revenue for the reminder of 2002.

Revenue
from monthly subscription fees represented 94.5% and 97.7% of cable television revenue for the nine months ended September 30, 2002 and 2001, respectively. During the
three and the nine months ended September 30, 2002, the Company generated approximately $0.9 million and $2.8 million, respectively, of premium subscription revenue as a result of
providing the HBO Poland service pay movie channel and the Canal+ Multiplex channels to cable subscribers as compared to $1.0 million and $3.3 million for the three and the nine months
ended September 30, 2001, respectively, when HBO Poland and Wizja Sport were provided as premium channels. Commencing April 1, 2001

40

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the latter channel was moved to the basic package, and in December 2001 it was discontinued. Therefore, Wizja Sport did not generate premium revenue after April 2001.

Revenue
from installation fees amounted to $105,000 and $266,000 for the three and nine months ended September 30, 2002 as compared to $136,000 and $566,000 for the three and nine
months ended September 30, 2001, respectively.

DIRECT
OPERATING EXPENSES. Direct operating expenses decreased $1.9 million, or 16.1%, from $11.8 million for the three months ended September 30, 2001 to
$9.9 million for the three months ended September 30, 2002 and decreased $6.3 million, or 17.1%, from $36.9 million for the nine months ended September 30, 2001 to
$30.6 million for the nine months ended September 30, 2002. Direct operating expenses decreased from 63.4% of revenues for the three months ended September 30, 2001 to 53.2% of
revenues for the three months ended September 30, 2002 and decreased from 64.2% of revenues for the nine months ended September 30, 2001 to 52.1% of revenues for the nine months ended
September 30, 2002. The decreases in direct operating expenses and direct operating expenses as a percentage of revenues are attributable primarily to a decrease in programming expenses
resulting from the discontinuation of the Wizja Jeden and Wizja Sport channels, decrease in programming charges (as a result of renegotiation of certain programming agreements) and a decrease in the
number of subscribers.

The
following table reflects details of the Company's direct operating expenses:

|                          |                           | Nine months ended
September 30, 2002 |        | as %
of revenue |       | Nine months ended
September 30, 2001 |    | as %
of revenue |  
|------------------------- | ------------------------- | ------------------------------------ | ------ | --------------- | ----- | ------------------------------------ | -- | --------------- | -
|Revenue                   |                           | $                                    | 58,679 |                 |       |                                      | $  | 57,514          |  
|Operating expenses:       |                           |                                      |        |                 |       |                                      |    |                 |  
|                          | Charged by affiliates:    |                                      |        |                 |       |                                      |    |                 |  
|                          |                           | Programming                          |        | $               | 9,053 |                                      | 15 | %               | $
|                          |                           | Internet expenses                    |        | $               | 1,113 |                                      | 2  | %               | $
|                          |                           | $                                    | 10,166 |                 | 17    | %                                    | $  | 18,105          |  
|                          | Charged by third parties: |                                      |        |                 |       |                                      |    |                 |  
|                          |                           | Programming                          |        | $               | 5,828 |                                      | 10 | %               | $
|                          |                           | Copyrights                           |        | $               | 1,645 |                                      | 3  | %               | $
|                          |                           | Network operation                    |        | $               | 5,003 |                                      | 9  | %               | $
|                          |                           | Service and Installation             |        | $               | 1,553 |                                      | 3  | %               | $
|                          |                           | Customer service                     |        | $               | 3,263 |                                      | 6  | %               | $
|                          |                           | Billing and MIS                      |        | $               | 3,145 |                                      | 5  | %               | $
|                          |                           | $                                    | 20,437 |                 | 35    | %                                    | $  | 18,770          |  
|Total operating expenses: |                           | $                                    | 30,603 |                 | 52    | %                                    | $  | 36,875          |  

The
Company's direct operating expenses charged by third parties increased by $1.7 million, or 9%, in nine months period ended September 30, 2002 compared to the nine
months ended September 30, 2001 primarily as a result of an increase of $0.7 million in third party programming expenses and an increase of $1.0 million in customer service. The
increase in third party programming expenses arouse as a result of different number of channels being charged directly to the Company. In 2001, the Company was charged directly by channel providers
for seven channels, while the rest of the Company's programming content was provided through the Company's affiliates. In 2002, the number of channels charged directly to the Company increased to 14
as a result of seven new programming agreements signed with channel providers.

During
the nine months ended September 30, 2002 the direct operating expenses charged by the Company's affiliates decreased by $7.9 million, or 44%, primarily due to the
discontinuation of the

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Wizja Jeden and Wizja Sport channels, agreements signed directly with channel providers (as discussed above) as well as a decrease in the number of subscribers.

All
programming agreements are entered into for fixed periods of time (usually at least 3 years or more) and affect the Company's cash flow as a fixed term commitment.

SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased by $3.4 million or 49.3% from $6.9 million for the three months ended
September 30, 2001 to $3.5 million for the three months ended September 30, 2002 and decreased $5.0 million or 26.9% from $18.6 million for the nine months ended
September 30, 2001 to $13.6 million for the nine months ended September 30, 2002.

As
a percentage of revenue, selling, general and administrative expenses decreased from 37.1% for the three months ended September 30, 2001 to approximately 18.8% for the three
months ended September 30, 2002 and decreased from 32.3% for the nine months ended September 30, 2001 to approximately 23.2% for the nine months ended September 30, 2002. These
decreases were attributable mainly to decreases in bad debt expense (of approximately $2.1 million) and improved operating efficiency.

DEPRECIATION
AND AMORTIZATION. Depreciation and amortization expense decreased $5.5 million, or 43.7%, from $12.6 million for the three months ended September 30,
2001 to $7.1 million for the three months ended September 30, 2002 and decreased $18.4 million, or 46.1%, from $39.9 million for the nine months ended September 30,
2001 to $21.5 million for the nine months ended September 30, 2002. Depreciation and amortization expense as a percentage of revenues decreased from 67.7% for the three months ended
September 30, 2001 to 38.2% for the three months ended September 30, 2002 and decreased from 69.4% for the nine months ended September 30, 2001 to 36.6% for the nine months ended
September 30, 2002. These decreases are attributable to the non-amortization of goodwill resulting from the application of SFAS No. 142.

OPERATING
LOSS. Each of the factors discussed above contributed to an operating losses of $1.9 million and $7.0 million for the three and the nine months ended
September 30, 2002, respectively, compared to an operating losses of $12.6 million and $37.9 million for the three and the nine months ended September 30, 2001,
respectively.

The
composition of customers receiving basic, intermediate and premium or internet services influences the Company's operating margin in the following ways:



42

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INTEREST
EXPENSE THIRD PARTY. Interest expense remained on a similar level of $0.4 million for the three months ended September 30, 2001 and 2002 and increased
$0.1 million, from $1.1 million for the nine months ended September 30, 2001 to $1.2 million for the nine months ended September 30, 2002. These interest expense
relates mainly to interest paid and accrued on the Company's 97/8% Senior Notes due 2003 (the "PCI Notes").

INTEREST
EXPENSE CHARGED BY UPC POLSKA Interest expense remained on a similar level of $0.2 million and $0.7 million for the three and nine months ended
September 30, 2001 and 2002.

FOREIGN
EXCHANGE GAIN/LOSS, NET. For the three and the nine months ended September 30, 2002, foreign exchange differences represented a loss of $2.0 million and loss of
$3.6 million, respectively, as compared to a foreign exchange loss of $5.1 million and loss of $1.9 for the three and the nine months ended September 30, 2001, respectively. This
change is attributable to the depreciation of the Polish zloty against the US dollar by 2.6% and by 4.1% during three and nine months ended September 30, 2002 as compared to the Polish zloty
depreciation against the US dollar by 6.3% and 2.3% during the three and nine months period ended September 30, 2001.

INCOME
TAX EXPENSE. The Company recorded $5,000 and $94,000 of income tax expense for the three and the nine months ended September 30, 2002, respectively, as compared to $79,000
and $162,000 for the three and the nine months ended September 30, 2001.

NET
LOSS. For the three months ended September 30, 2002 and the three months ended September 30, 2001, the Company had net losses of $4.6 million and
$18.3 million, respectively. For the nine months ended September 30, 2002 and the nine months ended September 30, 2001, the Company had net losses of $12.4 million and
$41.7 million, respectively. These losses were the result of the factors discussed above.

NET
LOSS APPLICABLE TO COMMON STOCKHOLDERS. Net loss applicable to common stockholders decreased from $23.4 million for the three months ended September 30, 2001 to
$10.2 million for the three months ended September 30, 2002 and decreased from $56.9 million for the nine months ended September 30, 2001 to $29.2 million for the
nine months ended September 30, 2002, mainly as a result of the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The
Company has met its cash requirements in recent years primarily with (i) capital contributions, debentures and preferred stock and loans from UPC Polska,
(ii) borrowings under available credit facilities, (iii) cash flows from operations, and (iv) the sale of $130 million aggregate principal amount of the Company's
97/8% Senior Notes due 2003 ("PCI Notes").

Since
the acquisition of all of the outstanding stock of the Company's parent, UPC Polska, by UPC on August 6, 1999, the Company has met its capital requirements primarily through
the sale of its Debenture Stock for $140 million to UPC Polska, and increases in paid in capital from UPC Polska.

43

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Pursuant
to the indentures governing the 97/8% Senior Notes due 2003 of Poland Communications, Inc. ("PCI Notes"), the Company is subject to certain restrictions
and covenants, including, without limitation, covenants with respect to the following matters:



The
Company has pledged to State Street Bank and Trust Company, the trustee for the PCI Notes (for the benefit of the holders of the PCI Notes) intercompany notes issued by PCBV, of a
minimum aggregate principal amount (together with cash and cash equivalents of the Company), equal to at least 110% of the outstanding principal amount of the PCI Notes, and that, in the aggregate,
provide cash collateral or bear interest and provide for principal repayments, as the case may be, in amounts sufficient to pay interest on the PCI Notes. Notes payable from PCBV to the Company were
$254,945,000 and $249,765,000 at September 30, 2002 and December 31, 2001, respectively.

The
indentures covering the PCI Notes provide that, following a Change of Control (as defined therein), each noteholder had the right, at such holder's option, to require the respective
issuer to offer to repurchase all or a portion of such holder's PCI Notes at the repurchase prices, described below. The Company believes that the August 6, 1999 acquisition by UPC of UPC
Polska constituted a Change of Control. Accordingly, PCI made offers to repurchase (the "Offers") from the holders of the PCI Notes. The Offers expired on November 2, 1999.

In
accordance with the terms of the indentures governing the PCI Notes, the Company was required to offer to repurchase the PCI Notes at the purchase price 101% of principal. As of
August 5, 1999, the Company had $129,668,000 aggregate principal amount at maturity of PCI Notes outstanding. Pursuant to the Offer, the Company purchased $113,237,000 aggregate principal
amount of PCI Notes for an aggregate price of $114,369,370. UPC Polska purchased 14,000 shares of Debenture Stock issued by the Company for $140 million to fund PCI's purchase of PCI Notes and
operations. The Debenture Stock is redeemable on December 31, 2003 at the issue price plus interest of 10% per annum compounded annually. To secure its obligations under the Debenture Stock,
the Company has pledged to UPC Polska notes issued to it by the Company's subsidiary, PCBV, with an aggregate principal amount of $176,815,000. The holders of PCI Notes will be equally and ratably
secured by the pledge in accordance with the terms of the PCI Indenture.

44

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UPC
Polska has historically financed the Company's operating and investing activities by making loans and increasing paid in capital. However, there were no additional loans and/or paid
in capital from UPC Polska during the nine month period ended September 30, 2002.

On
September 30, 2002, the Company had, on a consolidated basis, approximately $77.0 million aggregate principal amount of indebtedness outstanding (including accrued
interest and trade payable to UPC Polska and its affiliates), of which $62.5 million was owed to UPC Polska and its affiliates.

The
Company had positive cash flows from operating activities of $12.2 million for the nine months ended September 30, 2002 as compared to negative cash flows from
operating activities of $5.5 million for the nine months ended September 30, 2001, primarily due to decrease in the Company's direct operating expenses.

Cash
used for the purchase and expansion of the Company's cable television networks was $3.2 million and $9.0 million for the nine months ended September 30, 2002
and 2001, respectively.

On
September 30, 2002, the Company was committed to pay at least $68.9 million in guaranteed payments (including but not limited to payments for programming and rights)
over the next sixteen years of which at least approximately $6.8 million was committed through the end of 2002. In addition the Company has a variable obligation in relation to these
agreements, which is based on an actual number of subscribers in the month for which the fee is due.

The
following table presents the Company's minimum future commitments under its programming and lease contracts.

|            |  | 2002 |       | 2003 |   | 2004  |  | 2005 |       | 2006 |   | 2007 and
thereafter |  | Total
|----------- |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ------------------- |  | -----
|
|Building    |  | $    | 622   |      | $ | 1,428 |  | $    | 1,304 |      | $ | 1,297               |  | $    
|Conduit     |  |      | 630   |      |   | 467   |  |      |      |      |   |                    |  |      
|Programming |  |      | 1,204 |      |   | 4,791 |  |      | 4,974 |      |   | 3,063               |  |      
|Other       |  |      | 104   |      |   | 23    |  |      | 3     |      |   |                    |  |      
|Headend     |  |      | 22    |      |   | 4     |  |      |      |      |   |                    |  |      
|            |  |      |       |      |   |       |  |      |       |      |   |                     |  |      
|Total       |  |      | 2,582 |      |   | 6,713 |  |      | 6,281 |      |   | 4,360               |  |      
|            |  |      |       |      |   |       |  |      |       |      |   |                     |  |      

As
of September 30, 2002, the Company had negative working capital. In addition to its contractual commitments described in the table above, the Company has repayment obligations
on November 1, 2003 related to the PCI Notes of approximately $14.5 million in principal amount, plus interest; redemption obligations in December 2003 of approximately
$140.0 million, plus interest, related to the Mandatorily Redeemable Debenture Stock; and repayment obligations in 2003 of approximately $10.4 million, including interest, related to its
currently outstanding indebtedness owed to UPC Polska. The Company has trade payables of $52.1 million currently due to UPC Polska and its affiliates. The Company has in the past relied on UPC
Polska to help meet its obligations. UPC Polska has in the past relied on its parent, UPC, and UPC's affiliates to meet its obligations.

On
February 1, 2002, May 1, 2002, August 1, 2002 and November 1, 2002 UPC failed to make required interest payments on its outstanding debt securities, which
caused potential cross defaults to occur on certain other debt securities of UPC and its affiliates, including Belmarken Holding B.V. ("Belmarken"). The events of default continue to exist on UPC's
outstanding debt securities and loan agreements as of the date of filing of this Quarterly Report on Form 10-Q, although the holders of such obligations have not yet accelerated the
payment obligations of UPC with respect to such securities. UPC and its affiliates have obtained waivers to the potential cross defaults on their other debt securities and loan agreements, which are
subject to certain conditions.

45

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On
September 30, 2002, UPC announced that it had entered into a restructuring agreement with its parent company, UnitedGlobalCom, Inc. ("United"), certain affiliates of
United and certain holders of UPC's outstanding debt securities. The restructuring agreement contains:



The
restructuring agreement may be terminated for a variety of reasons, including UPC's failure to make bankruptcy filings by December 31, 2002 or the lapse of a period of nine
months from the date the bankruptcy filings are made. To the Company's knowledge none of the termination events has occurred as of the date of the filing of this Quarterly Report on Form 10Q.

On
September 30, 2002, UPC also announced that it had received an extended waiver to its principal loan agreement. The extended waiver expires on the earlier of
(A) March 31, 2003 or (B) the occurrence of certain events, none of which, to the knowledge of the Company, has occurred as of the date of the filing of this Quarterly Report on
Form 10Q.

Consummation
of the restructuring contemplated by the UPC's restructuring agreement is subject to various conditions. The Company cannot make any assurance that these conditions will be
satisfied or that the restructuring will be consummated. In addition, even if the restructuring agreement is consummated, there can be no assurance that UPC will be able to provide financing to the
Company in the future.

Although
the Company had anticipated being able to rely on UPC Polska, which is relying on UPC, to meet its payment obligations, given UPC's and UPC Polska's liquidity concerns, the
Company is not certain that it will receive the necessary (or any) financing from UPC Polska. If the Company is unable to rely on UPC Polska for financial support, it will have to meet its payment
obligations with cash on hand or with funds obtained from public or private debt or bank financing or any combination thereof, subject to the restrictions contained in the indentures governing the
outstanding senior indebtedness of the Company, UPC Polska, UPC and United.

It
is unlikely that the Company will be able to generate sufficient cash flow, and the Company cannot make any assurances that it will be able to raise funds, on terms that will be
favorable to the Company, or at all, in sufficient amounts to meet its payment obligations.

Moreover,
if the Company's plans or assumptions change, if its assumptions prove inaccurate, if it experiences unexpected costs or competitive pressures, or if existing cash, and
projected cash flow from operations prove to be insufficient, the Company may need to obtain greater amounts of additional financing. While it is the Company's intention to enter only into new
financing or refinancing that it considers advantageous, there can be no assurance that such sources of financing would be available to the Company in the future, or, if available, that they could be
obtained on terms acceptable to the Company.

The
Company has experienced net losses since its formation. As of December 31, 2001, there was substantial uncertainty whether the Company's sources of capital, working capital
and projected operating cash flow would be sufficient to fund the Company's expenditures and service the Company's indebtedness over the next year. Accordingly, there is substantial doubt regarding
the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent on (i) UPC Polska's ability to restructure the UPC Polska Notes and its
loans payable owing to UPC and its affiliate and (ii) the Company's ability to generate the cash flows required to enable it to maintain

46

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the Company's assets and satisfy the Company's liabilities, in the normal course of business, at the amounts stated in the consolidated financial statements. The report of the Company's former
independent accountant, Arthur Andersen Sp. z o.o., on the Company's consolidated financial
statements for the year ended December 31, 2001, includes a paragraph that states that the Company has suffered recurring losses from operations and has a negative working capital that raises
substantial doubt about the Company's ability to continue as a going concern.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The
principal market risk (i.e., the risk of loss arising from adverse changes in market rates and prices) to which the Company is exposed is foreign exchange rate risk from fluctuations
in the Polish zloty currency exchange rate. The Company's revenues from subscribers are in Polish zloty, while its major cost components are denominated in foreign currencies. In particular, the
Company's programming commitments are denominated in US dollars or Euros. Also the Company's loans payable to UPC Polska and the PCI Notes are expressed in U.S dollars.

The
Company's long-term debt is primarily subject to a fixed rate, and therefore the Company is neither materially benefited nor materially disadvantaged by variations in
interest rates.

FOREIGN EXCHANGE AND OTHER INTERNATIONAL MARKET RISKS

Operating
in international markets involves exposure to movements in currency exchange rates. Currency exchange rate movements typically affect economic growth, inflation, interest
rates, governmental actions and other factors. These changes, if material, can cause the Company to adjust its financing and operating strategies. The discussion of changes in currency exchange rates
below does not incorporate these other important economic factors.

International
operations constituted 100% of the Company's consolidated operating loss for the three months ended September 30, 2002. Some of the Company's operating expenses and
capital expenditures are expected to continue to be denominated in or indexed in U.S. dollars and Euros. By contrast, substantially all of the Company's revenues are denominated in zloty. Therefore,
any devaluation of the Polish zloty against the U.S. dollar that the Company is unable to offset through price adjustments will require it to use a large portion of its revenue to service its U.S.
dollar denominated obligations and contractual commitments.

The
Company estimates that a further 10% change in foreign exchange rates would impact reported operating loss by approximately $2.7 million. In other terms, a 10% depreciation of
the Polish zloty against the U.S. dollar and Euro would result in a $2.7 million increase in the reported operating loss. This was estimated using 10% of the Company's operating loss after
adjusting for unusual impairment and other items, including U.S. dollar and Euro denominated or indexed expenses. The Company believes that this quantitative measure has inherent limitations because,
as discussed in the first paragraph of this section, it does not take into account any governmental actions or changes in either customer purchasing patterns or the Company's financing or operating
strategies.

The
Company does not generally hedge translation risk. While the Company may consider entering into transactions to hedge the risk of exchange rate fluctuations, there is no assurance
that it will be able to obtain hedging arrangements on commercially satisfactory terms. Therefore, shifts in currency exchange rates may have an adverse effect on the Company's financial results and
on its ability to meet its U.S. dollar and Euro denominated debt obligations and contractual commitments.

Poland
has historically experienced high levels of inflation and significant fluctuations in the exchange rate for the zloty, but since 1999 the inflation has slowed. Inflation rates
were approximately 7.3% in 1999, approximately 10.1% in 2000 and approximately 5.5% in 2001. The rate of inflation for the nine month period ended September 30, 2002 was approximately 0.6%. The
exchange rate for the

47

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Polish zloty has stabilized and the rate of devaluation of the zloty has generally decreased since 1991. For the years ended December 31, 2000 and 2001, the Polish zloty has appreciated
against the U.S. dollar by approximately 0.12% and 3.80%, respectively. For the period of the nine months ended September 30, 2002, the Polish zloty has depreciated against the U.S. dollar by
approximately 4.1%.

Inflation
and currency exchange fluctuations may have, a material adverse effect on the business, financial condition and results of operations of the Company.

|                                        |       | Amount Outstanding
as of September 30, 2002 |        | Expected Fiscal Year For Repayment
|--------------------------------------- | ----- | ------------------------------------------- | ------ | ----------------------------------
|
|
|PCI Notes, net of discount              |       | $                                           | 14,509 |                                   
|Bank Rozwoju Exportu S.A. Euro facility |       |                                             | 113    |                                   
|                                        |       |                                             |        |                                   
|                                        | Total |                                             | $      | 14,622                            
|                                        |       |                                             |        |                                   

ITEM 4. CONTROLS AND PROCEDURES

Within
the 90-day period prior to the filing of this Quarterly Report on Form 10-Q, the Company carried out an evaluation under the supervision and with
the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures
pursuant to Rule 13a-14 under the Securities Exchange Act of 1934. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and
operation of these disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of the evaluations.

PART II    OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From
time to time, the Company is subject to various claims and suits arising out of the ordinary course of business. While the ultimate result of all such matters is not presently
determinable, based upon current knowledge and facts, management does not expect that their resolution will have a material adverse effect on the Company's consolidated financial position or results
of operations.

HBO ARBITRATION

The
Company and its parent are involved in a dispute against Polska Programming B.V. ("HBO") concerning its cable carriage agreement ("Cable Agreement") for the HBO premium movie
channel.
With respect to the Cable Agreement, on April 25, 2002, the Company and its parent commenced an arbitration proceeding before the International Chamber of Commerce, claiming that HBO was in
breach of the "most favored nations" clause thereunder ("MFN") by providing programming to other cable operators in the relevant Territory on terms that are more favorable than those offered to the
Company. Specifically, the Company contends that its "Service Fee" under the Cable Agreement should not include any minimum guarantees because such minimum guarantees are not required of other cable
operators in the Territory.

In
its answer in the arbitration, HBO asserted counterclaims against the Company, alleging that it was liable for minimum guarantees under the Cable Agreement. The Company responded to
the counterclaims by denying that it owes any sums for minimum guarantees under the Cable Agreement, in light of the MFN clause. The Company intends to vigorously prosecute its claims and defend
against

48

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HBO's counterclaims. Given that the actual number of future cable subscribers is unknown, the Company is unable to estimate the extent of any financial impact, if any, on the Company should HBO
prevail on its cable counterclaim.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not
applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION:

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)
Exhibit Listing



(b)
Reports on Form 8-K

None.

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SIGNATURE

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

| |  | POLAND COMMUNICATIONS INC.
| |  | --------------------------
| |  | By:                       

DATE:
November 14, 2002

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CERTIFICATION

I,
Simon Boyd, certify that:



Date:
November 14, 2002

|/s/SIMON BOYDName: Simon Boyd
Title: President And Chief Executive Officer |  | 
|-------------------------------------------------------------------------- |  | 

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CERTIFICATION

I,
Joanna Nieckarz, certify that:



Date:
November 14, 2002

|/s/JOANNA NIECKARZName: Joanna Nieckarz
Title: Chief Financial Officer |  | 
|---------------------------------------------------------------------- |  | 

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