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SEC Filings

10-Q
AVALON CABLE OF MICHIGAN INC/ filed this Form 10-Q on 08/16/1999
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                         AVALON CABLE, LLC AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      (in thousands except per share data)

3.       Merger and Acquisitions

    The Merger agreement between Michigan Holdings and Avalon Cable of Michigan,
Inc. permitted Avalon Cable of Michigan, Inc. to agree to acquire the 1,822,810
shares (approximately 38% of the outstanding stock) of Mercom that it did not
own (the "Mercom Acquisition"). On September 10, 1998 Avalon Cable of Michigan,
Inc. and Mercom entered into a definitive agreement (the "Mercom Merger
Agreement") providing for the acquisition by Avalon Cable of Michigan, Inc. of
all of such shares at a price of $12.00 per share. Avalon Cable of Michigan,
Inc. completed this acquisition in March 1999. The total estimated consideration
paid in conjunction with the Mercom Acquisition, excluding fees and expenses was
$21,900. The purchase price was allocated as follows: approximately $13,800 to
the elimination of minority interest, $1,170 to property, plant and equipment,
$6,700 to cable franchises and the excess of consideration paid over the fair
market value of the net assets acquired, or goodwill, of $240.

    In March 1999, Avalon Cable of Michigan, Inc. acquired the cable television
systems of Nova Cable for approximately $7,800, excluding transaction fees.

    On January 21, 1999, the Company through its subsidiary, Avalon New England,
acquired Novagate for a purchase price of $2,900.

    On March 26, 1999, the Company through its subsidiary, Avalon Michigan,
acquired the assets of R/Com, L.C., for a total purchase price of approximately
$450.

    In January 1999, the Company acquired all of the issued and outstanding
common Stock of Cross Country for a purchase price of approximately $2,500,
excluding transaction fees.

    On April 1, 1999, the Company, through its subsidiary, Avalon New England,
acquired Traverse Internet for $2,400.

    The acquisitions have been accounted for as purchases and the results of the
companies acquired have been included in the accompanying financial statements
since their acquisition dates. Accordingly, the consideration was allocated to
the net assets based on their respective fair market values. The excess of the
consideration paid over the estimated fair market values of the net assets
acquired was $12,940 and is being amortized using the straight line method over
15 years.

    In July 1999, Avalon New England purchased all of the cable systems of
Taconic Technology Corporation for approximately $8,525 (excluding transaction
fees).

4.       Income Taxes

    Upon the closure of the Mercom merger, Mercom was dissolved as a separate
taxable entity which resulted in a changed in tax status from a taxable entity
to a nontaxable entity. As a result, the Company recognized a tax benefit of
$1,362 in its results of operations and eliminated its deferred taxes, net in
the balance sheet.

5.       Commitments and Contingencies

    In connection with the acquisition of Mercom, former shareholders of Mercom
holding approximately 731,894 Mercom common shares or approximately 15.3% of all
outstanding Mercom common shares gave notice of their election to exercise
appraisal rights as provided by Delaware law. On July 2, 1999, former
shareholders of Mercom holding 535,501 shares of Mercom common stock filed a
petition for appraisal of stock in the Court of Chancery in the State of
Delaware. With respect to 209,893 of the total number of shares for which the
Company received notice, the Company received the notice of election from
beneficial holders of Mercom common shares and not from holders of record. The
Company believes that the notice with respect to the 209,893 shares did not
comply with Delaware law and is ineffective. The Company cannot predict at this
time the effect of the elections to exercise appraisal rights on the Company
since the Company does not know the extent to which these former shareholders
will continue to pursue appraisal

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