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SEC Filings

S-4/A
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4/A on 05/28/1999
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                       AVALON CABLE LLC AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands)

                                 March 31, 1999

1. Description of Business

   Avalon Cable LLC ("the Company"), and its wholly owned subsidiary Avalon
Cable Holdings Finance, Inc ("Avalon Holdings Finance"), were formed in October
1998, pursuant to the laws of the State of Delaware, as a wholly owned
subsidiary of Avalon Cable of New England Holdings, Inc. ("Avalon New England
Holdings").

   On November 6, 1998, Avalon New England Holdings contributed its 100%
interest in Avalon Cable of New England LLC ("Avalon New England") to Avalon in
exchange for a membership interest in Avalon. On that same date, Avalon
received $63,000 from affiliated entities, which was comprised of (i) a $45,000
capital contribution by Avalon Investors, LLC ("Avalon Investors") and (ii) an
$18,000 promissory note from Avalon Cable Holdings LLC ("Avalon Holdings"),
which was used to make a $62,800 cash contribution to Avalon New England.

   The cash contribution received by Avalon New England was used to (i)
extinguish existing indebtedness of $29,600 and (ii) fund a $33,200 loan to
Avalon Holdings Finance which matures on December 31, 2001.

   On December 10, 1998, Avalon received a dividend distribution from Avalon
New England in the amount of $18,206, which was used by Avalon to pay off the
promissory note payable to Avalon Holdings, plus accrued interest.

   In March 1999, after the acquisition of the remaining 38% of Mercom, Inc.
through a merger of Mercom into Avalon Cable of Michigan, Inc., and in order to
facilitate certain aspects of the financing of such acquisition, the following
series of transactions refer to as the "Reorganization" were completed:

  .  Avalon Cable of Michigan, Inc. transferred substantially all of its
     assets and liabilities to the Company, which then transferred those
     assets and liabilities to Avalon Cable of Michigan LLC and, as a result,
     Avalon Cable of Michigan LLC now operates the Michigan cluster;

  .  Avalon Cable of Michigan Holdings, Inc. ceased to be an obligor on the
     exchanged notes and together with Avalon Cable of Michigan, Inc. became
     a guarantor of the obligations of the Company under the exchanged notes;

  .  Avalon Cable of Michigan LLC became an additional obligor on the Senior
     Subordinated Notes; and

  .  Avalon Cable of Michigan, Inc. ceased to be an obligor on the Senior
     Subordinated Notes and the credit facility and became a guarantor of the
     obligations of Avalon Cable of Michigan LLC under the Senior
     Subordinated Notes and the credit facility.

   This reorganization is not expected to impact the operations of our Michigan
cluster.

   Avalon New England and Avalon Cable Michigan provide cable service to the
western New England area and the state of Michigan, respectively. Avalon New
England and Avalon Cable Michigan's cable systems offer customer packages of
basic and premium cable programming services which are offered at a per channel
charge or are packaged together to form a tier of services offered at a
discount from the combined channel rate. Avalon New England and Avalon Cable
Michigan cable systems also provide premium cable services to their customers
for an extra monthly charge. Customers generally pay initial connection charges
and fixed monthly fees for cable programming and premium cable services, which
constitute the principal sources of revenue for Avalon New England and Avalon
Cable Michigan.

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