Northland Cable Properties Seven Limited Partnership 10-Q 2009 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period endedJune 30, 2009

or

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                    to                    

Commission File Number:0-16718

Northland Cable Properties Seven Limited Partnership

(Exact Name of Registrant as Specified in Charter)

Washington	91-1366564
(State of Organization)	(I.R.S. Employer Identification No.)
101 Stewart Street, Suite 700, Seattle, Washington	98101
(Address of Principal Executive Offices)	(Zip Code)

(206) 621-1351

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ      Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o      No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero  Accelerated filero  Non-accelerated filero
(Do not check if a smaller reporting company) Smaller Reporting Companyþ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso      Noþ

TABLE OF CONTENTS

PART 1 — FINANCIAL INFORMATION
	ITEM 1. Financial Statements
	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 1A Risk Factors
	ITEM 2 Changes in securities
	ITEM 3 Defaults upon senior securities
	ITEM 4 Submission of matters to a vote of security holders
	ITEM 5 Other information
	ITEM 6 Exhibits
SIGNATURES
EX-31.(A)
EX-31.(B)
EX-32.(A)
EX-32.(B)

PART 1 — FINANCIAL INFORMATION

ITEM 1. Financial Statements

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS — (UNAUDITED)
(Prepared by the Managing General Partner)

	June 30,			December 31,
	2009			2008
ASSETS
Cash	$	1,107,076		$	1,734,024
Accounts receivable		246,479			271,957
Due from affiliates		38,494			27,626
Prepaid expenses		95,977			61,900
Property and equipment, net of accumulated depreciation of $14,886,857 and $14,304,219, respectively		5,750,782			5,570,163
Franchise agreements, net of accumulated amortization of $9,995,974		9,606,966			9,606,966
Total assets	$	16,845,774		$	17,272,636
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Accounts payable and accrued expenses	$	838,708		$	738,714
Due to Managing General Partner and affiliates		122,060			89,119
Deposits		25,715			24,595
Subscriber prepayments		248,717			225,347
Total liabilities		1,235,200			1,077,775
Partners’ capital (deficit):
General Partners:
Contributed capital, net		(25,367	)		(25,367	)
Accumulated deficit		(16,769	)		(23,340	)
		(42,136	)		(48,707	)
Limited Partners:
Contributed capital, net		17,312,982			18,554,382
Accumulated deficit		(1,660,272	)		(2,310,814	)
		15,652,710			16,243,568
Total partners’ capital		15,610,574			16,194,861
Total liabilities and partners’ capital	$	16,845,774		$	17,272,636

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS — (UNAUDITED)

	For the three months ended June 30,
	2009			2008
Service revenues	$	2,433,090		$	2,261,706
Expenses:
Cable system operations / cost of revenue (including $34,633 and $31,570 to affiliates in 2009 and 2008, respectively), excluding depreciation shown below		220,608			239,816
General and administrative (including $266,374 and $241,434 to affiliates in 2009 and 2008, respectively)		690,690			601,957
Programming / cost of revenue (including $10,450 and $3,077 to affiliates in 2009 and 2008, respectively)		908,260			792,713
Depreciation / cost of revenue		301,678			301,753
Loss on disposal of assets		2,631			—
		2,123,867			1,936,239
Income from operations		309,223			325,467
Other income (expense):
Interest expense and amortization of loan fees		—			(40,990	)
Interest income and other, net		(20,063	)		(105,786	)
		(20,063	)		(146,776	)
Net income	$	289,160		$	178,691
Allocation of net income:
General Partners (1%)	$	2,892		$	1,787
Limited Partners (99%)	$	286,268		$	176,904
Net income per limited partnership unit (49,656 units):		5.77			3.56

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS — (UNAUDITED)

	For the six months ended June 30,
	2009			2008
Service revenues	$	4,812,794		$	4,472,874
Expenses:
Cable system operations / cost of revenue (including $69,573 and $62,870 to affiliates in 2009 and 2008, respectively), excluding depreciation shown below		442,185			467,228
General and administrative (including $507,094 and $475,690 to affiliates in 2009 and 2008, respectively)		1,292,016			1,165,393
Programming / cost of revenue (including $16,907 and $5,977 to affiliates in 2009 and 2008, respectively)		1,792,284			1,602,044
Depreciation / cost of revenue		601,692			602,685
Loss (gain) on disposal of assets		2,631			(2,393	)
		4,130,808			3,834,957
Income from operations		681,986			637,917
Other income (expense):
Interest expense and amortization of loan fees		—			(63,970	)
Interest income and other, net		(24,873	)		(126,136	)
		(24,873	)		(190,106	)
Net income	$	657,113		$	447,811
Allocation of net income:
General Partners (1%)	$	6,571		$	4,478
Limited Partners (99%)	$	650,542		$	443,333
Net income per limited partnership unit (49,656 units):		13.10			8.93

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS — (UNAUDITED)

	For the six months ended June 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	657,113		$	447,811
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		601,692			602,685
Loan fee amortization		—			47,800
Loss (gain) on sale of assets		2,631			(2,393	)
(Increase) decrease in operating assets:
Accounts receivable		25,478			16,700
Due from affiliates		(10,868	)		74,045
Prepaid expenses		(34,077	)		(23,067	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		99,994			17,584
Due to Managing General Partner and affiliates		32,941			60,524
Deposits		1,120			3,830
Subscriber prepayments		23,370			22,010
Net cash provided by operating activities		1,399,394			1,267,529
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(784,942	)		(263,721	)
Proceeds from the sale of assets		—			8,700
Net cash used in investing activities		(784,942	)		(255,021	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings		—			(663,299	)
Distribution to limited partners		(1,241,400	)		—
Net cash used in financing activities		(1,241,400	)		(663,299	)
(DECREASE) INCREASE IN CASH		(626,948	)		349,209
CASH, beginning of period		1,734,024			928,495
CASH, end of period	$	1,107,076		$	1,277,704
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	—		$	16,170

The accompanying notes are an integral part of these statements.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(1) Basis of Presentation

These unaudited financial statements are being filed in conformity with Rule 10-01 of Regulation S-X regarding interim financial statement disclosure and do not contain all of the necessary footnote disclosures required for a full presentation of the balance sheets, statements of operations and statements of cash flows in conformity with accounting principles generally accepted in the United States of America. However, in the opinion of management, these statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Partnership’s financial position at June 30, 2009, its statements of operations for the three and six months ended June 30, 2009 and 2008, and its statements of cash flows for the six months ended June 30, 2009 and 2008. Results of operations for these periods are not necessarily indicative of results to be expected for the full year. These financial statements and notes should be read in conjunction with the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008.

(2) Intangible Assets

In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” the Partnership does not amortize intangible assets determined to have indefinite lives. The Partnership has determined that its franchises meet the definition of indefinite lived assets. The Partnership tests these assets for impairment on an annual basis during the fourth quarter, or on an interim basis if an event occurs or circumstances change that would indicate that the assets might be impaired.

Loan fees were being amortized using the straight-line method, which approximated the effective interest rate method. The Partnership paid off the remaining balance on its credit facility in April of 2008 at which time the unamortized loan fees were expensed.

(3) Notes Payable

On April 29, 2008, the Partnership paid off the outstanding balance of $529,575 on its credit facility and expensed unamortized loan fees of $38,240.

(4) Litigation

The Partnership is party to ordinary and routine litigation proceedings that are incidental to the Partnership’s business. Management believes that the outcome of all pending legal proceedings will not, individually or in the aggregate, have a material adverse effect on the Partnership and its financial statements.

(5) Potential Sale of Systems

On July 5, 2007, Northland Cable Properties Seven Limited Partnership (“the Partnership”) executed a purchase and sale agreement to sell the operating assets and franchise rights of its remaining cable systems serving the communities of Vidalia, Sandersville, Toccoa and Royston, Georgia to Green River Media and Communications, LLC (“Green River”), an unaffiliated third party. The transaction was expected to close by the end of March 2008.

The terms of the purchase and sale agreement include a sales price of $19,950,000, which may be adjusted based on subscription revenue generated prior to closing, and require that approximately ten percent of the gross proceeds be placed in escrow to secure compliance with representations and warranties, to be released to the Partnership eighteen months from the closing of the transaction. Net proceeds to be received upon closing are to be used to pay all remaining liabilities of the Partnership, including transaction costs and to make liquidating distributions to the limited and general partners. Limited partners will receive a final distribution eighteen months from the closing date when the escrow proceeds are released.

On December 19, 2007, the Partnership filed with the Security and Exchange Commission a definitive proxy statement under Regulation 14A of the Exchange Act, pursuant to which the Partnership was to solicit proxies from the limited partners in connection with the above described transactions. The proxy statement called for a special meeting of the limited partners held on February 27, 2008, for the following purposes: (i) to authorize the sale of substantially all the assets of the Partnership to Green River or its assignee with the consent of the Partnership, and (ii) to authorize the alternative sale of substantially all of the Partnership’s assets to Northland Communications Corporation, its managing general partner, or one or more affiliates of Northland Communications Corporation, if

the Green River transaction was not consummated by March 31, 2008, or such later date mutually agreed upon by the Partnership and Green River, or in the event that the Green River transaction was otherwise terminated prior to such date (the “Alternative Sale Transaction”). The Alternative Sale Transaction agreement contains substantially the same terms and conditions as provided in the Green River purchase agreement, except that the managing general partner’s obligation to close will be subject to the managing general partner’s ability to secure satisfactory financing. If such condition has not been met within 90 days after the agreement for the Alternative Sale Transaction becomes effective, the managing general partner would have the right to terminate the alternative purchase agreement without penalty. On February 27, 2008, at the special meeting of limited partners of the Partnership, limited partners voted to approve the two matters discussed above.

On March 31, 2008, the Partnership notified Green River of its termination of the asset purchase agreement dated as of July 5, 2007 between the Partnership and Green River (“the Agreement”). Green River disputed the right of the Partnership to terminate the Agreement and filed a motion in the District Court, City and County of Denver, seeking injunctive relief. Green River’s motion for preliminary injunction was granted by the court.

On September 9, 2008, the District Court, for the City and County of Denver upheld a preliminary injunction enjoining the Partnership from terminating the Agreement. Pursuant to the District Court’s preliminary injunction, the Agreement currently remains in full force and effect. The Partnership has appealed the initial injunction order of the District Court and it is currently unknown when the appellate court will rule on its appeal. The Partnership will diligently work toward completing a transaction for the sale of its operating assets that are the subject of the Agreement, although no assurance can be given that such a transaction will be consummated.

Fees for legal and accounting activities in connection with the aforementioned purchase and sale transaction amounted to $15,103 and $107,281 for the three months ended June 30, 2009 and 2008, respectively, and have been expensed as incurred within interest income and other in the accompanying statement of operations.

(6) Fair Value of Assets and Liabilities

We measure certain financial assets and financial liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the inputs used to determine fair value. These levels are:

• Level 1 — inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 — quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active.

• Level 3 — significant inputs are unobservable for the asset or liability.

The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis at June 30, 2009.

	Total		Level 1		Level 2		Level 3
Cash	$	1,107,076	$	1,107,076	$	—	$	—

(7) Subsequent Events

Effective for the quarter ending June 30, 2009, the Partnership adopted FASB Statement No. 165, Subsequent Events. The Statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, the Statement defines: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Management has reviewed events occurring through August 13, 2009, the date the financial statements were issued and no subsequent events occurred requiring accrual or disclosure.

PART I (continued)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations — Six Months Ended June 30, 2009 and 2008

Total basic subscribers decreased from 11,775 as of June 30, 2008 to 11,237 as of June 30, 2009. The loss in subscribers is a result of several factors including competition from Direct Broadcast Satellite (DBS) providers, availability of off-air signals in the Partnership’s markets and regional and local economic conditions. To address this customer trend, the Partnership is increasing its customer retention efforts and its emphasis on bundling its video and data products.

Revenue totaled $4,812,794 for the six months ended June 30, 2009, an increase of approximately 8% from $4,472,874 for the six months ended June 30, 2008. Revenue for the six months ended June 30, 2009, were comprised of the following sources:

• $3,501,933 (73%) from basic and expanded services,

• $204,643 (4%) from premium services

• $22,984 (0%) from digital services

• $572,024 (12%) from high speed Internet services

• $139,886 (3%) from telephony services

• $149,360 (3%) from advertising

• $88,891 (2%) from late fees

• $133,073 (3% ) from other sources.

Average monthly revenue per subscriber increased $7.75 or approximately 12% from $62.29 for six months ended June 30, 2008 to $70.04 for the six months ended June 30, 2009. This increase is attributable to increased penetration of new products, specifically, high-speed Internet and telephony services and rate increases implemented on February 1, 2009. This increase in average monthly revenue per subscriber was offset by the aforementioned decrease in basic subscribers.

Operating expenses, excluding general and administrative, programming, depreciation expenses, and loss (gain) on disposal of assets totaled $442,185 for the six months ended June 30, 2009, representing a decrease of approximately 5% from $467,228 for the six months ended June 30, 2008. This decrease is primarily attributable to an increase in the capitalization of certain costs as a result of increases in capital spending levels offset by increases in pole rent, system utility and operating salary expenses. Employee wages, which represent the primary component of operating expenses, are reviewed annually, and in most cases, increased based on cost of living adjustments and other factors. Therefore, assuming the number of operating and regional employees remains constant, management expects increases in operating expenses in the future.

General and administrative expenses totaled $1,292,016 for the six months ended June 30, 2009, representing an increase of approximately 11% from $1,165,393 for the six months ended June 30, 2008. This increase is primarily attributable to increased billing service fees, property insurance, audit fees and management fees and a bad debt reserve for an advertising receivable of which the collection is uncertain in the amount of $53,772.

Programming expenses totaled $1,792,284 for the six months ended June 30, 2009, an increase of approximately 12% from $1,602,044 for the six months ended June 30, 2008. The increase is attributable to higher costs charged by various program suppliers and increased costs associated with the increased penetration of high-speed Internet and telephony services, offset by a decrease in basic subscribers from 11,775 as of June 30, 2008 to 11,237 as of June 30, 2009. Rate increases from program suppliers, as well as new fees due to the launch of additional channels and high-speed Internet services, will contribute to the trend of increased programming costs in the future, assuming that the number of subscribers remains constant.

Depreciation expense totaled $601,692 for the six months ended June 30, 2009, consistent with the same period in 2008. Depreciation of recent purchases related to the upgrade of plant and equipment were offset by certain assets becoming fully depreciated.

Interest income and other, net totaled $24,873 and $126,136 for the six months ended June 30, 2009 and 2008, respectively, and consists primarily of costs incurred in connection with the proposed sale of the Partnerships assets.

Results of Operations — Three Months Ended June 30, 2009 and 2008

Total basic subscribers decreased from 11,775 as of June 30, 2008, to 11,237 as of June 30, 2009. The loss in subscribers is a result of several factors including competition from Direct Broadcast Satellite (DBS) providers, availability of off-air signals in the Partnership’s markets and regional and local economic conditions. To address this customer trend, the Partnership is increasing its customer retention efforts and its emphasis on bundling its video and data products.

Revenue from operations totaled $2,433,090 for the three months ended June 30, 2009, an increase of approximately 8% from $2,261,706 for the three months ended June 30, 2008. Revenues for the three months ended June 30, 2009 were comprised of the following sources:

• $1,759,646 (72%) from basic and expanded services,

• $101,378 (4%) from premium services

• $10,958 (1%) from digital services

• $297,454 (12%) from high speed Internet services

• $76,187 (3%) from telephony services

• $80,202 (3%) from advertising

• $45,126 (2%) from late fees

• $62,139 (3% ) from other sources.

Average monthly revenue per subscriber increased $7.88 or approximately 12% from $63.53 for three months ended June 30, 2008, to $71.41 for the three months ended June 30, 2009. This increase is attributable to increased penetration of new products, specifically, high-speed Internet and telephony services and rate increases implemented on February 1, 2009. This increase in average monthly revenue per subscriber was offset by the aforementioned decrease in basic subscribers.

Operating expenses, excluding general and administrative, programming, depreciation expenses, and loss on disposal of assets totaled $220,608 for the three months ended June 30, 2009, representing a decrease of approximately 8% from $239,816 for the three months ended June 30, 2008. This decrease is primarily attributable to an increase in the capitalization of certain costs as a result of increases in capital spending levels and decreases in vehicle operating expenses offset by increases in operating salaries and pole rental expense. Employee wages, which represent the primary component of operating expenses, are reviewed annually, and in most cases, increased based on cost of living adjustments and other factors. Therefore, assuming the number of operating and regional employees remains constant, management expects increases in operating expenses in the future.

General and administrative expenses totaled $690,690 for the three months ended June 30, 2009, representing an increase of approximately 15% from $601,957 for the three months ended June 30, 2008. This increase is primarily attributable to increases in billing service fees, property insurance, audit fees and marketing expenses, as well as revenue based expenses such as management fees and franchise fees and a bad debt reserve for an advertising receivable of which the collection is uncertain in the amount of $53,772.

Programming expenses totaled $908,260 for the three months ended June 30, 2009, an increase of approximately 15% from $792,713 for the three months ended June 30, 2008. The increase is attributable to higher costs charged by various program suppliers and increased costs associated with the increased penetration of high-speed Internet and telephony services, offset by the aforementioned decrease in basic subscribers. Rate increases from program suppliers, as well as new fees due to the launch of additional channels and high-speed Internet services, will contribute to the trend of increased programming costs in the future, assuming that the number of subscribers remains constant.

Depreciation expense totaled $301,678 for the three months ended June 30, 2009, consistent with the same period in 2008. Depreciation of recent purchases related to the upgrade of plant and equipment were offset by certain assets becoming fully depreciated.

Interest expense and amortization of loan fees decreased from $40,990 for the three months ended June 30, 2008 to $0 for the three months ended June 30, 2009. The Partnership paid off the outstanding balance on its credit facility on April 29, 2008.

Interest income and other, net totaled $20,063 and $105,786 for the three months ended June 30, 2009 and 2008, respectively, and consists primarily of costs incurred in connection with the proposed sale of the Partnerships assets.

Liquidity and Capital Resources

The Partnership’s primary source of liquidity is cash flow provided by operations. The Partnership generates cash through the monthly billing of subscribers for cable and other services. Based on management’s analysis, the Partnership’s cash flow from operations and cash on hand will be sufficient to cover future operating costs, planned capital expenditures and working capital needs over the next twelve-month period. The Partnership agreement is currently set to expire on December 31, 2010. Extension of the Partnership’s life would need approval from a majority of its limited partners.

Net cash provided by operating activities totaled $1,399,394 for the six months ended June 30, 2009. Adjustments to the $657,113 net income for the period to reconcile to net cash provided by operating activities consisted primarily of depreciation of $601,692, and changes in other operating assets and liabilities of $137,955.

Net cash used in investing activities totaled $784,942 for the six months ended June 30, 2009 and consisted of purchases of property and equipment.

Net cash used in financing activities for the six months ended June 30, 2009 consisted of $1,241,400 in cash distributions to limited partners.

Notes Payable

On April 29, 2008, the Partnership paid off the outstanding balance of $529,575 on its credit facility and expensed unamortized loan fees of $38,240.

Obligations and Commitments

In addition to working capital needs for ongoing operations, the Partnership has capital requirements related to minimum operating lease payments. The following table summarizes the Partnership’s contractual obligations as of June 30, 2009:

			Payments Due By Period
			Less than 1		1 – 3		3 – 5		More than
	Total		year		Years		years		5 years
Minimum operating lease payments	$	10,932	$	10,932		—		—		—

(a)	These contractual obligations do not include accounts payable and accrued liabilities, which are expected to be paid in 2009.
(b)	The Partnership also rents utility poles in its operations. Amounts due under these agreements are not included in the above minimum operating lease payments amounts as, generally, pole rentals are cancelable on short notice. The Partnership does however anticipate that such rentals will recur. Pole rental expense was $154,843 in 2008.

Capital Expenditures

During the first six months of 2009, the Partnership paid approximately $785,000 for capital expenditures. These expenditures include the continued deployment of fiber and quality assurance projects to upgrade the plant in all systems.

Due to the pending sale of the Partnership’s assets, the level of capital expenditures that may be incurred by the Partnership during the remainder of 2009 is uncertain. Capital expenditures for the remainder of the year will be dependant on the timing of the sale however no assurances can be given that such a sale will take place. Planned expenditures include the continuation of distribution plant upgrades to increase channel capacity and two-way capability in all systems, potential line extension opportunities, the possible launch of additional HD (high definition television) services in selected systems, vehicle replacements and the continued deployment of both high-speed Internet and digital telephone services in certain areas of the Partnership’s systems.

Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based on the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following critical accounting policies require a more significant amount of management judgment than other accounting policies the Partnership employs.

Revenue Recognition

Cable television service, internet and telephone revenue, including service and maintenance, is recognized in the month service is provided to customers. Advance payments on services to be rendered are recorded as subscriber prepayments and deferred. Revenues resulting from the sale of local spot advertising are recognized when the related advertisements or commercials appear before the public.

Property and Equipment

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

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

Intangible Assets

In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” the Partnership does not amortize intangible assets determined to have indefinite lives. The Partnership has determined that its franchises meet the definition of indefinite lived assets. The Partnership tests these assets for impairment on an annual basis during the fourth quarter, or on an interim basis if an event occurs or circumstances change that would indicate the assets might be impaired.

Management believes the franchises have indefinite lives because the franchises are expected to be used by the Partnership for the foreseeable future as determined based on an analysis of all pertinent factors, including changes in legal, regulatory or contractual provisions and effects of obsolescence, demand and competition. In addition, the level of maintenance expenditures required to obtain the future cash flows expected from the franchises is not material in relation to the carrying value of the franchises. While the franchises have defined lives based on the franchising authority, renewals are routinely granted, and management expects them to continue to be granted. This expectation is supported by management’s experience with the Partnership’s franchising authorities and the franchising authorities of the Partnership’s affiliates.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Partnership is not subject to market risks arising from changes in interest rates as a result of the Partnership paying off the outstanding balance of its credit facility on April 29, 2008.

ITEM 4. Controls and Procedures

The Partnership maintains disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Chief Executive Officer and President (Principal Financial and Accounting Officer) of the Managing General Partner have evaluated these disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q and have determined that such disclosure controls and procedures are effective.

There has been no change during the most recent quarter in the Partnership’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1 Legal proceedings

On March 31, 2008, the Partnership notified Green River of its termination of the asset purchase agreement dated as of July 5, 2007 between the Partnership and Green River (“the Agreement”). Green River disputed the right of the Partnership to terminate the Agreement and filed a motion in the District Court, City and County of Denver, seeking injunctive relief. Green River’s motion for preliminary injunction was granted by the court.

On September 9, 2008, the District Court, for the City and County of Denver upheld a preliminary injunction enjoining the Partnership from terminating the Agreement. Pursuant to the District Court’s preliminary injunction, the Agreement currently remains in full force and effect. The Partnership has appealed the initial injunction order of the District Court and it is currently unknown when the appellate court will rule on its appeal. The Partnership will diligently work toward completing a transaction for the sale of its operating assets that are the subject of the Agreement, although no assurance can be given that such a transaction will be consummated.

The Partnership is party to ordinary and routine litigation proceedings that are incidental to the Partnership’s business. Management believes that the outcome of all pending legal proceedings will not, individually or in the aggregate, have a material adverse effect on the Partnership, its financial statements or prospects.

ITEM 1A Risk Factors

There have been no material changes from the Partnership’s risk factors as disclosed in the 2008 Form 10-K.

ITEM 2 Changes in securities

     None

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

(a) Exhibit Index

31 (a).  Certification of Chief Executive Officer of Northland Communications Corporation, the Managing General Partner, dated August 13, 2009 pursuant to section 302 of the Sarbanes-Oxley Act

31 (b).  Certification of President (Principal Financial and Accounting Officer) of Northland Communications Corporation, the Managing General Partner, dated August 13, 2009 pursuant to section 302 of the Sarbanes-Oxley Act

32 (a).  Certification of Chief Executive Officer of Northland Communications Corporation, the Managing General Partner, dated August 13, 2009 pursuant to section 906 of the Sarbanes-Oxley Act

32 (b).  Certification of President (Principal Financial and Accounting Officer) of Northland Communications Corporation, the Managing General Partner, dated August 13, 2009 pursuant to section 906 of the Sarbanes-Oxley Act

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP

BY: Northland Communications Corporation,
Managing General Partner

SIGNATURES	CAPACITIES	DATE
/S/ RICHARD I. CLARKRichard I. Clark	Executive Vice President, Treasurer and Assistant Secretary	8-13-09
/S/ GARY S. JONESGary S. Jones	President	8-13-09