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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 OF MICHIGAN, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      (in thousands except per share data)

1. Basis of Presentation and Description of Business

   Avalon Cable of Michigan, Inc. ("the Company") was formed in June 1998,
pursuant to the laws of the state of Delaware, as a wholly owned subsidiary of
Avalon Cable of Michigan Holdings, Inc. ("Michigan Holdings".) On June 3, 1998,
the Company entered into an Agreement and Plan of Merger (the "Agreement")
among the Company, Avalon Cable of Michigan Holdings Inc. ("Avalon Holdings")
and Cable Michigan, Inc. (Cable Michigan), pursuant to which the Company will
merge into Cable Michigan and Cable Michigan will become a wholly owned
subsidiary of Avalon Holdings (the "Merger"). As part of the Merger, the name
of the company was changed to Avalon Cable of Michigan, Inc.

   In accordance with the terms of the Agreement, each share of common stock,
par value $1.00 per share ("common stock"), of the Company outstanding prior to
the effective time of the Merger (other than treasury stock, shares owned by
Avalon Holdings or its subsidiaries, or shares as to which dissenters' rights
have been exercised) shall be converted into the right to receive $40.50 in
cash (the "Merger Consideration"), subject to certain possible closing
adjustments.

   In conjunction with the acquisition of Cable Michigan, the Company acquired
Cable Michigan's 62% ownership interest in Mercom, Inc. ("Mercom").

   On November 6, 1998, the Company completed its merger. The total
consideration payable in conjunction with the merger, including fees and
expenses is $431,629, including repayment of all existing Cable Michigan
indebtedness and accrued interest of $135,205. Subsequent to the merger, the
arrangements with RCN and CTE were terminated. The Agreement also permitted the
Company to agree to acquire the remaining shares of Mercom that it did not own.

   Michigan Holdings contributed $140,000 in cash to the Company, which was
used to consummate the Merger. On November 5, 1998, Michigan Holdings received
$105,000 in cash in exchange for promissory notes to lenders (the "Bridge
Agreement"). On November 6, 1998, Michigan Holdings contributed the proceeds
received from the Bridge Agreement and an additional $35,000 in cash to the
Company in exchange for 100 shares of common stock.

   In March 1999, after the acquisition of Mercom, Inc. (as described in Note
3) the Company completed a series of transactions to facilitate certain aspects
of its financing. As a result of these transactions:

  . Avalon Cable of Michigan LLC has become the operator of the Michigan
    cluster replacing Avalon Cable of Michigan, Inc.

  . Avalon Cable of Michigan LLC is an obligor on the Senior Subordinated
    Notes replacing Avalon Cable of Michigan, Inc., and

  . Avalon Cable of Michigan, Inc. is a guarantor of the obligations of
    Avalon Cable of Michigan LLC under the Senior Subordinated Notes. Avalon
    Cable of Michigan, Inc. does not have significant assets, other than its
    investment in Avalon Cable LLC.

   The Company provides cable services to various areas in the state of
Michigan. The Company's cable systems offer customer packages for basic cable
programming services which are offered at a per channel charge or packaged
together to form a tier of services offered at a discount from the combined
channel rate. The Company's 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 principle sources of revenue for the
Company.

                                     F-114