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S-4
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
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<PAGE>
 
            AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
5. Intangible Assets
 
   Intangible assets consist of the following:
 

<TABLE>
      <S>                                                              <C>
      Cable Franchise................................................. $344,063
      Goodwill........................................................   81,705
      Deferred Financing Costs........................................   10,657
                                                                       --------
      Total...........................................................  436,425
      Less--accumulated amortization..................................   (5,112)
                                                                       --------
      Intangible assets, net.......................................... $431,313
                                                                       ========
</TABLE>

 
   Amortization expense charged to operations in during the period from
inception (June 2, 1998) through December 31, 1998 was $5,112.
 
6. Account payable and accrued expenses consist of the following:
 

<TABLE>
      <S>                                                              <C>
      Accounts payable................................................ $ 5,321
      Accrued cable programming costs.................................   1,824
      Accrued taxes...................................................   1,107
      Other...........................................................   1,942
                                                                       -------
                                                                       $10,194
                                                                       =======
 
7. Income Taxes
 
   The income tax provision (benefit) in the accompanying consolidated
financial statements of operations is comprised of the following:
 
<CAPTION>
                                                                        1998
                                                                       -------
      <S>                                                              <C>
      Current
       Federal........................................................ $   243
       State..........................................................     --
                                                                       -------
         Total Current................................................     243
                                                                       -------
      Deferred
       Federal........................................................  (2,757)
       State..........................................................    (240)
                                                                       -------
         Total Deferred...............................................  (2,997)
                                                                       -------
         Total (benefit) for income taxes............................. $(2,754)
                                                                       =======
</TABLE>

 
   The benefit for income taxes is different from the amounts computed by
applying the U.S. statutory federal tax rate of 35% for 1998. The differences
are as follows:
 

<TABLE>
<CAPTION>
                                                                        1998
                                                                       -------
      <S>                                                              <C>
      (Loss) before (benefit) for income taxes........................ $(7,524)
                                                                       =======
      Federal tax (benefit) at statutory rates........................  (2,633)
      State income taxes..............................................    (198)
      Goodwill........................................................      77
                                                                       -------
      (Benefit) for income taxes......................................  (2,754)
                                                                       =======
</TABLE>

 

<TABLE>
<CAPTION>
                                                             Tax Net
                                                            Operating Expiration
      Year                                                   Losses      Date
      ----                                                  --------- ----------
      <S>                                                   <C>       <C>
      1998.................................................  $10,360     2018
</TABLE>

 
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