Northland Cable Properties Seven Limited Partnership 10-Q 2008 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 ended June30, 2008

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.

Yeso           Noþ

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 filer  o
(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 Continuing 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
EXHIBIT 31.(A)
EXHIBIT 31.(B)
EXHIBIT 32.(A)
EXHIBIT 32.(B)

UNTIMELY FILING

Northland Cable Properties Seven Limited Partnership (NCP Seven) filed a form 12b-25 on August 14, 2008 as it was unable to file its quarterly report of Form 10-Q for the quarter ended June 30, 2008 without unreasonable effort or expense. This late filing was the result of NCP Seven’s late filing of its Form 10-K for the year ended December 31, 2007 which was filed on July 2, 2008 and Form 10-Q for the quarter ended March 31, 2008, which was filed on August 21, 2008. As a result of the late filings of the Form 10-K for the year ended December 31, 2008 and Form 10-Q for the quarter ended March 31, 2008, NCP Seven’s independent auditors did not have adequate time to complete their procedures related to the Form 10-Q for the quarter ended June 30, 2008 in order to allow NCP Seven to file its Form 10-Q by the prescribed deadline.

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,
	2008			2007
ASSETS
Cash	$	1,277,704		$	928,495
Accounts receivable		202,529			219,229
Due from affiliates		31,532			105,577
Prepaid expenses		103,289			80,222
Property and equipment, net of accumulated depreciation of $13,920,715 and $13,320,422, respectively		5,640,443			5,985,714
Franchise agreements, net of accumulated amortization of $9,995,974, respectively		9,606,966			9,606,966
Loan fees and other intangibles, net of accumulated amortization of $692,080 and $806,150, respectively		—			47,800
Total assets	$	16,862,463		$	16,974,003
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Accounts payable and accrued expenses	$	842,972		$	825,388
Due to Managing General Partner and affiliates		107,000			46,476
Deposits		24,700			20,870
Subscriber prepayments		179,806			157,796
Notes payable		—			663,299
Total liabilities		1,154,478			1,713,829
Partners’ capital (deficit):
General Partners:
Contributed capital, net		(25,367	)		(25,367	)
Accumulated deficit		(28,209	)		(32,687	)
		(53,576	)		(58,054	)
Limited Partners:
Contributed capital, net		18,554,382			18,554,382
Accumulated deficit		(2,792,821	)		(3,236,154	)
		15,761,561			15,318,228
Total partners’ capital		15,707,985			15,260,174
Total liabilities and partners’ capital	$	16,862,463		$	16,974,003

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,
	2008			2007
Service revenues	$	2,261,706		$	2,233,538
Expenses:
Cable system operations (including $31,570 and $25,945 to affiliates in 2008 and 2007, respectively), excluding depreciation and amortization shown below		239,816			202,823
General and administrative (including $241,434 and $218,002 to affiliates in 2008 and 2007, respectively)		601,957			598,298
Programming (including $3,077 and $2,181 to affiliates in 2008 and 2007, respectively)		792,713			797,032
Depreciation		301,753			363,625
Gain on disposal of assets		—			(685	)
		1,936,239			1,961,093
Income from operations		325,467			272,445
Other income (expense):
Interest expense and amortization of loan fees		(40,990	)		(32,823	)
Interest income and other, net		(105,786	)		746
		(146,776	)		(32,077	)
Net income	$	178,691		$	240,368
Allocation of net income:
General Partners	$	1,787		$	2,404
Limited Partners	$	176,904		$	237,964
Net income per limited partnership unit (49,656 units):	$	4		$	5

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,
	2008			2007
Service revenues	$	4,472,874		$	4,429,557
Expenses:
Cable system operations (including $62,870 and $58,933 to affiliates in 2008 and 2007, respectively), excluding depreciation and amortization shown below		467,228			404,999
General and administrative (including $475,690 and $426,572 to affiliates in 2008 and 2007, respectively)		1,165,393			1,166,884
Programming (including $5,977 and $4,071 to affiliates in 2008 and 2007, respectively)		1,602,044			1,589,039
Depreciation		602,685			722,321
Gain on disposal of assets		(2,393	)		(1,887	)
		3,834,957			3,881,356
Income from operations		637,917			548,201
Other income (expense):
Interest expense and amortization of loan fees		(63,970	)		(71,932	)
Interest income and other, net		(126,136	)		1,047
		(190,106	)		(70,885	)
Income from continuing operations		447,811			477,316
Income from discontinued operations (note 6)		—			59,928
Net income	$	447,811		$	537,244
Allocation of net income:
General Partners	$	4,478		$	5,372
Limited Partners	$	443,333		$	531,872
Income from continuing operations per limited partnership unit (49,656 units):	$	9		$	10
Income from discontinued operations per limited partnership unit (49,656 units):	$	—		$	1

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,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	447,811		$	537,244
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		602,685			722,321
Loan fee amortization and write off		47,800			19,119
Gain on sale of assets		(2,393	)		(1,887	)
Gain from discontinued operations		—			(59,928	)
(Increase) decrease in operating assets:
Accounts receivable		16,700			(11,473	)
Due from affiliates		74,045			26,355
Prepaid expenses		(23,067	)		22,737
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		17,584			(70,269	)
Due to Managing General Partner and affiliates		60,524			34,506
Deposits		3,830			4,890
Subscriber prepayments		22,010			(15,154	)
Net cash provided by operating activities		1,267,529			1,208,461
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(263,721	)		(378,815	)
Proceeds from sale of systems		—			985,955
Proceeds from the sale of assets		8,700			5,647
Net cash (used in) provided by investing activities		(255,021	)		612,787
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings		(663,299	)		(1,208,706	)
Net cash used in financing activities		(663,299	)		(1,208,706	)
INCREASE IN CASH		349,209			612,542
CASH, beginning of period		928,495			324,241
CASH, end of period	$	1,277,704		$	936,783
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	16,170		$	30,358

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, 2008, its statements of operations for the six and three months ended June 30, 2008 and 2007, and its statements of cash flows for the six months ended June 30, 2008 and 2007. 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, 2007.

(2) Intangible Assets

In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” the Partnership does not amortize goodwill or any other 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 reduce the fair value of a reporting unit below its carrying value.

Loan fees are being amortized using the straight-line method, which approximates 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

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

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

Under the terms of the amended loan agreement, the Partnership has agreed to restrictive covenants which require the maintenance of certain ratios, including a Maximum Total Leverage Ratio of not more than 2.25 to 1.00, a Minimum Interest Coverage Ratio of not less than 3.50 to 1.00, a Minimum Total Debt Service Coverage Ratio of not less than 1.10 to 1.00, and a Maximum Capital Expenditures limitation of not more than $2,500,000.

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

In March 2005, Northland filed a complaint against one of its programming networks seeking a declaration that a December 2004 contract between Northland and the programmer was an enforceable contract related to rates Northland would pay for its programming and damages for breach of that contract. The programmer counter- claimed, alleging copyright infringement and breach of contract.

On September 14, 2006 Northland and the programmer entered into a Settlement Agreement, under which, (i) the parties mutually released each other from and against all claims, (ii) the parties agreed to dismiss the lawsuit, and (iii) the parties set forth the definitive terms of carriage of the programmers services for the period commencing December 1, 2004, through December 31, 2007.

In addition, under the terms of the Settlement Agreement, Northland made payment in full of all license fees from all Northland affiliates, including the Partnership, for the period of December 1, 2004, through July 31, 2006, all of which had been previously accrued. In addition, Northland paid the programmer, in four installments, a Supplemental License fee, approximately $120,000, or 9.5%, of which was remitted by the Partnership. The Partnership recorded a charge of $39,000 in expense associated with this supplemental license fee during 2007 and has classified it as a programming expense.

The Partnership is party to other 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. Closing of this transaction would have resulted in the liquidation of the Partnership.

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. Pursuant to the court’s preliminary injunction, the Agreement currently remains in full force and effect. 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 $107,281 and $129,085 for the three and six months ended June 30, 2008, respectively, and have been expensed as incurred within interest income and other in the accompanying statement of operations.

(6) Discontinued Operations

In January 2007, the Partnership received proceeds totaling $985,955 as the result of the sale of the Bay City, TX system in June 2005. Amounts totaling $59,928 have been reflected as results of discontinued operations in the accompanying financial statements for the six months ended June 30, 2007. These amounts are included in discontinued operations as they related to interest earned on amounts held in escrow for purposes of indemnification claims by the buyer pursuant to the terms of the purchase and sale agreement. The amounts were recorded in the quarter ended March 31, 2007 as they did not become fixed and determinable until the completion of the escrow period in January 2007.

PART I (continued)

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

Results of Continuing Operations — Six Months Ended June 30, 2008 and 2007

Total basic subscribers attributable to continuing operations decreased from 12,630 as of June 30, 2007 to 11,775 as of June 30, 2008. 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 continuing operations totaled $4,472,874 for the six months ended June 30, 2008, an increase of approximately 1% from $4,429,557 for the six months ended June 30, 2007. Revenues from continuing operations for the six months ended June 30, 2008 were comprised of the following sources:

• $3,345,439 (75%) from basic and expanded services,

• $235,510 (5%) from premium services

• $31,111 (1%) from digital services

• $458,262 (10%) from high speed Internet services

• $62,830 (1%) from telephony services

• $148,904 (3%) from advertising

• $83,166 (2%) from late fees

• $107,652 (3 %) from other sources.

Average monthly revenue per subscriber increased $4.91 or approximately 9% from $57.38 for six months ended June 30, 2007 to $62.29 for the six months ended June 30, 2008. This increase is attributable to increased penetration of new products, specifically, high-speed Internet and telephony services. 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 gain on disposal of assets attributable to continuing operations totaled $467,228 for the six months ended June 30, 2008, representing an increase of approximately 15% from $404,999 for the six months ended June 30, 2007. This increase is primarily attributable to increases in operating salaries and vehicle operating 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 attributable to continuing operations totaled $1,165,393 for the six months ended June 30, 2008, remaining constant with the same period in 2007. Increases in administrative services and other administrative expenses were offset by reductions in franchise fee expenses and increased administrative overhead charged to affiliates.

Programming expenses attributable to continuing operations totaled $1,602,044 for the six months ended June 30, 2008, an increase of approximately 1% from $1,589,039 for the six months ended June 30, 2007. 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 12,630 as of June 30, 2007 to 11,775 as of June 30, 2008. 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 allocated to continuing operations decreased approximately 17%, from $722,321 for the six months ended June 30, 2007 to $602,685 for the six months ended June 30, 2008. This decrease is attributable to certain assets becoming fully depreciated, offset by depreciation of recent purchases related to the upgrade of plant and equipment.

Interest expense and amortization of loan fees allocated to continuing operations decreased approximately 11% from $71,932 for the six months ended June 30, 2007 to $63,970 for the six months ended June 30, 2008. This decrease is attributable to lower interest expense due to the Partnership paying off the outstanding balance on its credit facility partially offset by the write off of $38,240 in unamortized loan fees.

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

Results of Operations — Three Months Ended June 2008 and 2007

Total basic subscribers decreased from 12,630 as of June 30, 2007 to 11,775 as of June 30, 2008. 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 $2,261,706 for the three months ended June 30, 2008, an increase of approximately 1% from $2,233,538 for the three months ended June 30, 2007. Revenues from operations for the three months ended June 30, 2008 were comprised of the following sources:

• $1,688,933 (75%) from basic and expanded services,

• $117,786 (5%) from premium services

• $15,676 (1%) from digital services

• $235,623 (10%) from high speed Internet services

• $32,123 (1%) from telephony services

• $79,545 (4%) from advertising

• $42,155 (2%) from late fees

• $49,865 (2 %) from other sources.

Average monthly revenue per subscriber increased $5.11 or approximately 9% from $58.42 for three months ended June 30, 2007 to $63.53 for the three months ended June 30, 2008. This increase is attributable to rate increases implemented throughout the Partnership’s systems during the second quarter and increased penetration of new products, specifically, high-speed Internet and telephony services. 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 gain on disposal of assets totaled $239,816 for the three months ended June 30, 2008, representing an increase of approximately 18% from $202,823 for the three months ended June 30, 2007. This increase is primarily attributable to increases in operating salaries and vehicle operating 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 $601,957 for the three months ended June 30, 2008, representing an increase of approximately 1% from $598,298 for the same period in 2007. Increases in administrative services and other administrative expenses were offset by reductions in franchise fee expenses and increased administrative overhead charged to affiliates.

Programming expenses totaled $792,713 for the three months ended June 30, 2008, a decrease of approximately 1% from $797,032 for the three months ended June 30, 2007. Decrease in basic subscribers from 12,630 as of June 30, 2007 to 11,775 as of June 30, 2008, was offset by higher costs charged by various program suppliers and increased costs associated with the increased penetration of high-speed Internet and telephony services. 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 decreased approximately 17%, from $363,625 for the three months ended June 30, 2007 to $301,753 for the three months ended June 30, 2008. This decrease is attributable to certain assets becoming fully depreciated, offset by depreciation of recent purchases related to the upgrade of plant and equipment.

Interest expense and amortization of loan fees increased approximately 25% from $32,823 for the three months ended June 30, 2007 to $40,990 for the three months ended June 31, 2008. This increase is primarily attributable to the Partnership expensing unamortized loan fees of $38,240 as a result of paying off the outstanding balance on its credit facility partially offset by lower interest expense.

Interest income and other, net totaled $105,786 for the three months ended June 30, 2008, and consists primarily of litigation 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. Losses from uncollectible accounts have not been material. 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.

Net cash provided by operating activities totaled $1,267,529 for the six months ended June 30, 2008. Adjustments to the $447,811 net income for the period to reconcile to net cash provided by operating activities consisted primarily of depreciation of $602,685, loan fee amortization of $47,800 and changes in other operating assets and liabilities of $171,626.

Net cash used in investing activities totaled $255,021 for the six months ended June 30, 2008 and consisted of $263,721 in capital expenditures offset by $8,700 in proceeds from the sale of assets.

Net cash used in financing activities for the six months ended June 30, 2008 consisted of $663,299 in principal payments that were made under the amended term loan agreement.

Notes Payable

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

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

Under the terms of the amended loan agreement, the Partnership has agreed to restrictive covenants which require the maintenance of certain ratios, including a Maximum Total Leverage Ratio of not more than 2.25 to 1.00, a Minimum Interest Coverage Ratio of not less than 3.50 to 1.00, a Minimum Total Debt Service Coverage Ratio of not less than 1.10 to 1.00, and a Maximum Capital Expenditures limitation of not more than $2,500,000.

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 for annual maturities related to required minimum operating lease payments. The following table summarizes the Partnership’s contractual obligations as of June 30, 2008 after giving effect to the repayment of its notes payable on April 29, 2008:

			Payments Due By Period
			Less than 1		1 – 3		3 – 5		More than
	Total		year		Years		years		5 years
Minimum operating lease payments	$	14,928	$	11,196	$	3,732		—		—

(a)	These contractual obligations do not include accounts payable and accrued liabilities, which are expected to be paid in 2008.
(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.

Capital Expenditures

During the first six months of 2008, the Partnership incurred approximately $264,000 in capital expenditures. These expenditures include quality assurance projects to upgrade and maintain the plant in Vidalia, Sandersville, and Toccoa, GA 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 2008 is uncertain. Capital expenditures for the second half 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 HDTV (high definition television) services in selected systems, vehicle replacements and the continued deployment of high-speed Internet 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 revenue, including service and maintenance, is recognized in the month service is provided to customers. Advance payments on cable services to be rendered are recorded as subscriber prepayments. Revenues resulting from the sale of local spot advertising are recognized when the related advertisements or commercials appear before the public.

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 goodwill or any other 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 reduce the fair value of the assets below its carrying value.

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

There have been no significant changes to the information required under this item from what was disclosed in our 2007 Annual Report on Form 10-K.

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 1Legal proceedings

In March 2005, Northland filed a complaint against one of its programming networks seeking a declaration that a December 2004 contract between Northland and the programmer was an enforceable contract related to rates Northland would pay for its programming and damages for breach of that contract. The programmer counter-claimed, alleging copyright infringement and breach of contract.

On September 14, 2006 Northland and the programmer entered into a Settlement Agreement, under which, (i) the parties mutually released each other from and against all claims, (ii) the parties agreed to dismiss the lawsuit, and (iii) the parties set forth the definitive terms of carriage of the programmers services for the period commencing December 1, 2004, through December 31, 2007.

In addition, under the terms of the Settlement Agreement, Northland made payment in full of all license fees from all Northland affiliates, including the Partnership, for the period of December 1, 2004, through July 31, 2006, all of which had been previously accrued. In addition, Northland paid the programmer, in four installments, a Supplemental License fee, approximately $120,000, or 9.5%, of which was remitted by the Partnership. The Partnership recorded a charge of $39,000 in expense associated with this supplemental license fee during 2007 and has classified it as a programming expense.

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. Pursuant to the court’s preliminary injunction, the Agreement currently remains in full force and effect. 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, prospects or debt service abilities.

ITEM 1ARisk Factors

There have been no material changes from the Partnership’s risk factors as disclosed in the 2007 Form 10-K.

ITEM 2Changes in securities

     None

ITEM 3Defaults upon senior securities

     None

ITEM 4Submission of matters to a vote of security holders

On February 27, 2008, at the special meeting of limited partners of Northland Cable Properties Seven Limited Partnership (the “Partnership”), limited partners voted to authorize the Partnership and its managing general partner to sell substantially all of the Partnership’s assets to Green River pursuant to the terms of an asset purchase agreement dated as of July 5, 2007 between the Partnership and Green River. A total of 33,141.50 units, or 95.61 percent of the units voted were cast in favor of authorizing the Green River transaction, representing 66.74 percent of the total units outstanding and entitled to vote at the meeting.

Limited partners voted to authorize the Partnership and its managing general partner to sell substantially all of the Partnership’s assets to its managing general partner, or one or more of its affiliates, 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 transaction between the Partnership and Green River was otherwise terminated prior to such date. A total of 30,765.84 units, or 88.76 percent of the units voted were cast in favor of authorizing the alternative transaction between the Partnership and its managing general partner, representing 61.96 percent of the total units outstanding and entitled to vote at the meeting.

ITEM 5Other information

     None

ITEM 6Exhibits

(a) Exhibit Index

31 (a).	Certification of Chief Executive Officer of Northland Communications Corporation, the Managing General Partner, dated August 22, 2008 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 22, 2008 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 22, 2008 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 22, 2008 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	8-22-08
/s/ GARY S. JONESGary S. Jones	President	8-22-08