SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Information Statement
Pursuant to Section 14(f) of
the Securities Exchange Act of 1934
and Rule 14f-1 thereunder
HARMONY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-19577 95-4333330
(State or other (Commission File) (I.R.S. Employer of
jurisdiction Number Identification No.)
incorporation
or organization)
1990 Westwood Boulevard
Suite 310
Los Angeles, California 90025-4676
(Address of principal executive offices, including zip code)
(310) 446-7700
(Registrant's telephone number, including area code)
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<PAGE>
November 6, 1997
HARMONY HOLDINGS, INC.
1990 Westwood Boulevard
Suite 310
Los Angeles, California 90025-4676
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
INTRODUCTION
General
This Information Statement is being furnished to holders of
the common stock, par value $.01 per share (the "Common Stock"), of
Harmony Holdings, Inc., a Delaware corporation (the "Company"), in
connection with the designation made by Children's Broadcast
Corporation, a Minnesota corporation ("CBC"), of a majority of the
board of directors of the Company immediately following CBC's
acquisition of 1,369,231 shares of Common Stock together with options
to buy an additional 550,000 shares of Common Stock on July 22, 1997.
Following such purchase CBC beneficially owned 27.4% of the Common
Stock and subsequently increased its beneficial ownership to 40.7% of
the Common Stock as of the date hereof. THIS INFORMATION STATEMENT IS
BEING PROVIDED SOLELY FOR INFORMATIONAL PURPOSES AND NOT IN CONNECTION
WITH A VOTE OF THE COMPANY'S STOCKHOLDERS.
In connection with CBC's acquisition of Common Stock on July
22, 1997, Harvey Bibicoff and the other members of the Company's Board
of Directors at such time resigned as directors. Prior to resigning,
such directors appointed Christopher T. Dahl, the Chairman of CBC, to
the Company's Board and elected Mr. Dahl as the Company's Chairman. Mr.
Dahl then appointed Richard W. Perkins, a director of CBC, and William
M. Toles, a shareholder of CBC, as Company directors to fill existing
vacancies. Those three directors then appointed William E. Cameron as a
fourth director of the Company leaving one remaining unfilled position
on the Board.
Section 14(f) of the Securities Exchange Act of 1934 requires
an issuer to furnish an Information Statement such as this Information
Statement to its stockholders at least 10 days prior to the time
persons designated by a purchaser such as CBC take office as directors
. Although CBC has already designated the Company's directors the
Company is now providing an Information Statement in compliance with
Section 14(f) and Rule 14f-1 promulgated thereunder and expects shortly
to send a proxy statement in respect of an Annual Meeting of
Stockholders to be held on January 13, 1998. At such meeting, the
Company's stockholders will have the right to elect all of the
directors of the Company.
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<PAGE>
You are urged to read this Information Statement carefully.
You are not however, required to take any action.
The information contained in this Information Statement
concerning CBC and the CBC appointed directors has been furnished to
the Company by CBC, and the Company assumes no responsibility for the
accuracy or completeness of any such information.
The Common Stock
The only outstanding class of voting securities of the Company
is its Common Stock. As of the close of business on November 5, 1997
(the "Mailing Record Date"), there were outstanding 6,487,429 shares of
Common Stock, each of which is entitled to one vote on each matter to
be considered at meetings of stockholders, including the election of
directors. This Information Statement is first being mailed on November
12, 1997 to holders of record of the Common Stock as of the Mailing
Record Date.
Designees To The Company's Board Of Directors
The Company's Bylaws presently provide for a Board of
Directors of five directors. Currently the Company has four directors
and there is one vacancy.
In connection with its acquisition of Common Stock on
July 22, 1997, CBC has designated all of the current members of the
Board of Directors: ChristopherT. Dahl, Richard W. Perkins,
William M. Toles and William E. Cameron.
The following table, prepared from information furnished to
the Company by CBC, sets forth the name, occupation and age of each of
the current directors. Each is a citizen of the United States of
America.
<TABLE>
<CAPTION>
The following table sets forth certain information with
respect to each of the current Directors and of the Company:
Name Age Position with the Company
<S> <C> <C>
Christopher T. Dahl 54 Chairman of the Board and Chief Executive Officer
Richard W. Perkins 66 Director
William E. Cameron 52 Director
William M. Toles 50 Director
</TABLE>
Christopher T. Dahl, has been President and Chairman of the
Board of the Company since July 22,1997. Effective November 3, 1997 he
was appointed Chief Executive Officer and resigned as President. Since
its inception in February 1990, Mr. Dahl has been the President, Chief
Executive Officer and Chairman of the Board of Directors of Children's
Broadcasting Corporation (ACBC@), the country's premier radio network
devoted exclusively to programming for children. He is also Chairman
and Chief Executive Officer of Community Airwaves Corporation, a
company that owns and operates radio stations in the Midwest and
Hawaii.
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<PAGE>
Richard W. Perkins, has been a Director of the Company since
July 22, 1997. For more than five years, Mr. Perkins has been President
and Chief Executive Officer of Perkins Capital Management, Inc., a
registered investment advisor. Mr. Perkins is a director of the
following companies: Community Airwaves Corporation; CBC; Bio-Vascular,
Inc.; CNS, Inc.; LifeCore Biomedical, Inc.; Nortech Systems, Inc.;
Eagle Pacific Industries, Inc.; and Quantech LTD.
William E. Cameron, has been a Director of the Company since
July 22, 1997. For over five years, Mr. Cameron has been head of
International Business Development for Universal Health Communications,
the largest medical/health/wellness video library in the world.
William M. Toles, has been a Director of the Company since
July 22, 1997. For more than five years, Mr. Toles has been the
President and Chief Executive Officer of Tol-O-Matics, a privately held
manufacturer of motion control products.
Management Matters
There are no arrangements or understandings known to the
Company between any of the Directors who are the nominees for Directors
or executive officers of the Company and any other person pursuant to
which any such person was elected as a Director or an executive
officer, except the employment agreements pursuant to which Harvey
Bibicoff and Brian Rackohn are employed, the terms of which are
described under "Executive Compensation -Employment Agreements". There
are no family relationships between any Directors who are also the
nominees for Directors or executive officers of the Company.
The Board of Directors of the Company held a total of six
meetings during the fiscal year of the Company ended June 30, 1997. All
of the Directors attended all of the meetings.
The Company did have a standing audit committee consisting of
the independent or non-employee Directors, which committee was formed
on December 11, 1995 and dissolved on July 22, 1997, when all of the
then existing three Directors resigned including the two independent
Directors. The existing Board of Directors that was established on July
22, 1997 formed an audit committee on October 6,1997 comprised of Mr.
Cameron and Mr. Toles neither of whom is employed by the Company.
Directors of the Company are elected to an annual term that
expires at the Company's annual meeting of stockholders.
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<PAGE>
Executive Compensation
Summary of Executive Officer Compensation. The following table
sets forth the total compensation paid or accrued by the Company to the
Chief Executive Officer and the other most highly compensated executive
officer of the Company who served in such capacities during fiscal 1997
("Named Executive Officers") whose aggregate cash compensation exceeded
$100,000 for all services rendered to the Company and its subsidiaries
during each of the last three fiscal years:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Awards
Fiscal Year Salary Bonus Other Annual Options/SARs
Name and Position Ended Amount Amount Compensation (Number)
<S> <C> <C> <C> <C> <C>
Harvey Bibicoff, Chief Executive Officer(1 1997 247,200 -- -- 350,000
1996 165,000 -- -- --
1995 165,288 -- -- --
Brian Rackohn, Chief Financial Officer(2) 1997 133,900 -- -- 75,000
1996 114,900 -- -- 25,000
1995 101,923 -- -- 25,000
</TABLE>
(1) Effective November 3, 1997, Mr. Bibicoff resigned his duties as Chief
Executive Officer.
(2) In connection with the issuance of 75,000 options exercisable at a
price of $1.50, 25,000 options were cancelled that had been issued at an
exercise price of $3.00 in fiscal 1996 and 25,000 options were cancelled
that had been issued at an exercise price of $3.30 in fiscal 1995.
Stock Option Grants in Fiscal Year ended June 30, 1997. The following table
contains information concerning the grant of stock options under the stock
option plan which was adopted on August 7, 1991 and amended at the 1996 Annual
Meeting of Stockholders held in December 1995 (the "Stock Option Plan") to the
Named Executive Officers in the fiscal year ended June 30, 1997:
<TABLE>
<CAPTION>
Stock Option Grants in Fiscal Year ended June 30, 1997
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
% of Total
Options
Options Granted in Exercise Expiration
Name Granted Fiscal Year Price Date 5% (2) 10% (2)
---- ------- ----------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harvey Bibicoff 350,000 36% $1.50 10/01/01 $145,048 $320,518
Brian Rackohn 75,000(1) 8% 1.50 01/02/02 31,082 68,682
</TABLE>
(1) In connection with the issuance of 75,000 options, 25,000
options were cancelled that had been issued at an exercise
price of $3.00 in fiscal 1996 and 25,000 options were
cancelled that had been issued at an exercise price of $3.30
in fiscal 1995.
(2) Potential gains and net of exercise price, but before taxes
associated with exercise. The 5% and 10% assumed compounded
annual rates of stock price appreciation are mandated by rules
of the Securities and Exchange Commission. There can be no
assurance provided to any executive officer or any other
holder of the Company's securities that the actual stock price
appreciation over the ten-year option term will be at the
assumed 5% and 10% levels or at any other defined level.
Unless the market price of the Common Stock appreciates over
the option term, no value will be realized from the option
grants made to persons named in this table.
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Stock Option Exercises in Fiscal Year ended June 30,
1997 and Option Values at June 30, 1997. The following table
provides information on the Named Executive Officers'
unexercised options at June 30, 1997. None of the Named
Executive Officers exercised any options during the fiscal
year ended June 30, 1997:
<TABLE>
<CAPTION>
Stock Option Values at June 30, 1997
For the year ended 6/30/97
Name Shares acquired Dollar value Number of Value of
from options Realized on unexercised In-the-Money
exercised exercise Options/SARs Options/SARs
at FY-End (#) at FY-End ($) (1)
<S> <C> <C> <C> <C> <C> <C>
Harvey Bibicoff 0 0 850,000 (e) 670,313 (e)
Brian Rackohn 0 0 50,000 (e) 40,625 (e)
25,000 (ue) 20,313 (ue)
</TABLE>
Exercisable (e)
Unexercisable (ue)
(1) Represents the closing price of the Common Stock on June 30, 1997 minus
the exercise price of the options.
<TABLE>
<CAPTION>
Ten Year Stock Option Repricings
Name Date Number of Market Price of Exercise Price at New Length of
securities Stock at Time Time of Repricing Exercise Original
underlying of Time of or Amendment ($) Price ($) Option Term
Stock Options Repricing or Remaining at
Repriced or Amendment ($) Date of
Amended (#) Repricing or
Amendment
------------------- ------------ ----------------- ----------------- -------------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Brian Rackohn 01/02/97 25,000 1.25 3.30 1.50 2.1years
Brian Rackohn 01/02/97 25,000 1.25 3.00 1.50 3.25years
</TABLE>
Compensation of Directors
No fees are paid to Directors of the Company who are also
officers or employees of the Company for their services as members of
the Board. Harry Shuster and Ivan Berkowitz both of whom resigned as
Board of Director members on July 22, 1997 had been issued five year
stock options to acquire 25,000 shares at an exercise price of $2.00
during the fiscal year ended June 30, 1997 and paid $250 per meeting
for work on the audit committee. The Company reimbursed all Directors
for reasonable travel and lodging expenses incurred in attending
meetings of the Board.
Concurrently with his election as a Director and Chairman
of the Board of the Company on July 22, 1997, Christopher T. Dahl was
appointed the Company's President. Effective November 3, 1997, Mr.
Dahl was appointed the Company's Chief Executive Office and resigned
as President. Mr. Dahl presently receives an annual salary of $75,000
for his services.
On August 1, 1997 the Company entered into an independent
contractor agreement with William Cameron, a Director of the Company.
Under the agreement Mr. Cameron will be providing non-exclusive
services to the Company including, without limitation, the initiation,
promotion, development and maintenance of business and investment
contacts relating to increasing the Company's sales , marketing and
investment opportunities. The contract is at will and compensation
under the contract is $3,000 for every month that it is in force.
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<PAGE>
COMPENSATION REPORT
During the fiscal year ended June 30, 1997, the Company did
not have a Compensation Committee and therefore, the entire Board acted
on the matters that would have been acted on by Compensation Committee.
The Compensation Report set forth below described the compensation
policies of the Board of Directors for the fiscal year ended June 30,
1997 and reflects the salaries and bonuses paid during that fiscal
year. The current Board of Directors assumed their positions in July
1997 and established a Compensation Committee in October 1997.
Accordingly, the policies described below may not reflect the policies
of the Compensation Committee or the current Board. The Compensation
Report shall not be deemed incorporated by reference by any general
statement incorporating by reference this information statement into
any filing under the Securities Act 1933 or the Securities Exchange Act
of 1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under such act.
Overview and Philosophy
The Board establishes the general compensation policies of the
Company, determines the compensation levels for the Chief Executive
Officer ("CEO") and other senior Company officers, and administers
and/or provides oversight on all short-term (annual) incentive plans,
all long-term incentive plans, including the Stock Option Plan, and
approves any grants of stock options, stock and/or stock warrants to
Company officers.
The Company applies a consistent philosophy to compensation
for all employees, including the officers. This philosophy is based
upon the premise that the achievements of the Company result from the
coordinated efforts of all individuals working toward common, defined
objectives. The Company strives to attain these objectives through
teamwork that is focused upon meeting the expectations of customers and
stockholders.
Compensation Policy
The Company's compensation policy is to ensure that a
substantial portion of potential aggregate annual compensation be
contingent upon the performance of the Company. The goals of the
compensation programs are to align compensation with performance and to
enable the Company to attract, retain and reward personnel who
contribute to the success of the Company. The Company's compensation
program for officers is based on the same guidelines that apply to all
Company employees.
The Company is committed to providing incentive opportunities
that, together with base salaries (where appropriate), provide for
competitive and equitable total cash compensation opportunities.
Additionally, future base salary increases or incentive pay
opportunities are directly linked to the achievement of key financial
objectives.
The variable compensation plans focus respective employees on
the immediate objectives of the business and their job; encourage
employees to work together as a team to achieve Company success; and,
recognize and reward the sustained contribution of outstanding
performers within the Company.
Components of Compensation
The Company has compensation programs that include both cash
and equity components. The Board has established base salary, short and
long-term incentive compensation mix targets for each officer and for
all employees, where applicable, of the Company. The compensation mix
targets define the desired percentage for each component of total
compensation.
With respect to cash compensation for officers, the Company
sets base salaries and target incentive opportunities for each officer
by reviewing the cash compensation provided to comparable positions and
through assessing the internal equity of cash compensation
opportunities based on position responsibilities, the performance of
each incumbent, and overall levels of contribution to the Company. When
considering competitive pay practices, the Board reviews compensation
levels in both the entertainment industry and general industry at firms
comparable in size and revenue to the Company.
With regard to equity-based compensation for officers, the
Company considered and granted stock options for the reported year.
Stock option grants were based on relative position, responsibilities
and/or historical and expected contribution to the Company.
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Compensation of the Chief Executive Officer
Mr. Bibicoff was Chief Executive Officer of the Company from
January 19, 1996 until November 3, 1997. Based on a thorough review, it
was determined that Mr. Bibicoff's base salary was within a competitive
range of pay, as compared with companies of similar size and scope. In
determining Mr. Bibicoff's compensation, the Board considered various
factors particularly Mr. Bibicoff=s guidance in the Company=s
turnaround. See AEmployment Agreements" herein.
The Board of Directors (at June 30, 1997):
Harvey Bibicoff
Ivan Berkowitz
Harry Shuster
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended June 30, 1997, the Company had no
Compensation Committee or other Board committee performing equivalent
functions. Mr. Bibicoff, the Company's Chief Executive Officer until
November 3, 1997, served as a Director of the Company until July 22,
1997 and participated in deliberations of the Board concerning the
compensation of all executive officers other than himself.
Employment Agreements
On January 1, 1997, Brian Rackohn, Chief Financial Officer, of
the Company, entered into a two-year employment contract with the
Company, which contract expires on December 31, 1998. Under the
contract, Mr. Rackohn is entitled to a salary of $132,000 in year one
and $141,000 in year two. He was also granted five-year options to
purchase 75,000 shares of the Company's Common Stock at an exercise
price of $1.50 per share. In addition 50,000 existing five-year options
previously granted to Mr. Rackohn, to purchase shares of the Company's
Common Stock were canceled. See "Executive Compensation" herein.
On May 2, 1994, Harvey Bibicoff, Chief Executive Officer
entered into a four-year employment contract with the Company, which
was to expire on June 30, 1998. Under such agreement, Mr. Bibicoff
earned an annual salary of $165,000 and was granted five-year options
to purchase 250,000 shares of the Company's Common Stock at an exercise
price of $2.50 per share. On October 1, 1996, Mr. Bibicoff entered into
an amendment to his May 1994, employment contract that provided for a
revised expiration date of August 19, 2000. Mr. Bibicoff then became
entitled to an annual salary of $265,000 per year and was granted
additional five-year options to purchase 350,000 shares of the
Company's Common Stock at an exercise price of $1.50 per share. On July
22, 1997, Mr. Bibicoff entered into an amended and restated employment
agreement, which expires on July 21, 1999 and entitles him to a salary
of $265,000 per year. However, the Company, at the sole discretion of
its Board, had the right to terminate Mr. Bibicoff's obligations to
perform as the Company's Chief Executive Officer upon furnishing ten
days written notice. Commencing September 20, 1997, Mr. Bibicoff also
obtained the right to resign his obligations and authority as the
Company's Chief Executive Officer upon furnishing ten days written
notice. Upon either event Mr. Bibicoff would continue to receive all
remuneration's due him for the remaining term of the agreement. On
October 22, 1997, Mr. Bibicoff submitted to the Company the ten days
written notice to resign from his obligations and authority as the
Company's Chief Executive Officer.
8
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Comparison of Five Preceding Year Cumulative Stockholder Return
The following graph shows the cumulative return experienced by
the Company's stockholders during the period July 1, 1992 through June
30, 1997 as compared with the NASDAQ Total Return Index (U.S.) And the
NASDAQ Tele-communications Stock Index. The graph assumes $100 on July
1, 1992 in the Company's Common Stock and each of the indices. Total
return calculations assume the reinvestment of all dividends. The
Company has never paid dividends.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
Fiscal Year End
----------------------------------------------------------------------------------------------------------
7/01/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Harmony Holdings, Inc. 100 200 88 112 68 74
NASDAQ Total return Index (US) 100 126 127 170 218 265
NASDAQ Financial 100 131 148 169 220 322
--------------------------------- ----------- ------------ ----------- ----------- ----------- -----------
</TABLE>
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Common
Stock of the Company beneficially owned as of October 14, 1997, by: (i)
each person who beneficially owns more than five percent of the
Company's Common Stock; (ii) each Director and Named Executive Officer
and (iii) all executive officers and Directors of the Company as a
group. Except as otherwise noted, the person named has sole voting and
dispositive power over the total number of shares beneficially owned:
Amount and
<TABLE>
<CAPTION>
Name and Nature of Percentage
Address of Beneficial of Outstanding
Beneficial Owner (1) Ownership Common Stock
<S> <C> <C>
Children's Broadcasting Corporation 2,938,731 (2)(4) 40.7%
Harvey Bibicoff 600,000 (2) 9.6%
Christopher T. Dahl 10,000 *
Richard W. Perkins 200,000 3.1%
William E. Cameron 0 *
William M. Toles 0 *
Brian Rackohn 50,000 (3) *
All officers and Directors as a group
(6 persons) 910,000 (2)(3) 14.1%
</TABLE>
* Percentage omitted because it is less than 1%
(1) The business address of Messrs Bibicoff and Rackohn
and all officers and directors of the Company is 1990
Westwood Boulevard, Suite 310, Los Angeles,
California 90025. The address of Children's
Broadcasting Corporation ("CBC") is 724 First Street
North, 4th floor, Minneapolis, Minnesota 55401.
(2) Includes 300,000 immediately exercisable options
held by Mr. Bibicoff and 750,000 immediately
exercisable options held by CBC.
(3) Consists of 50,000 immediately exercisable options
held by Mr. Rackohn.
(4) Based solely on information contained in schedule 13D
as filed with the Securities and Exchange Commission,
CBC has entered into an agreement with Glenn B.
Laken, whereby Mr. Laken can require CBC to purchase
225,000 shares of the Company's stock he controls on
or after January 31, 1998, and CBC has the right to
purchase such shares on or before February 15, 1998,
all subject to various conditions set forth in such
agreement.
10
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-11-
CERTAIN TRANSACTIONS
As of September 30, 1997, the Company was owed $208,889
pursuant to a note receivable from Harvey Bibicoff ,the Company's Chief
Executive Officer until November 3, 1997, in connection with Mr.
Bibicoff's purchase of stock options from a former officer of the
Company in 1996. The note was originally issued for $260,000, is due
May 31, 1998 and accrues interest at the prime rate plus 1 1/2 %.
The Company has entered into an agreement with Bibicoff &
Associates, Inc., whereby such corporation provides investor relation
services to the Company through September 30, 2000, for a flat rate of
$75,000 paid upon execution of the agreement. Harvey Bibicoff who was
the Company's Chief Executive Officer until November 3, 1997, is also
the President of Bibicoff & Associates, Inc.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and Directors, and persons who
beneficially own more than 10% of the Company's Common Stock, to file
reports of ownership and changes in ownership with the Securities and
Exchange Commission. Executive officers, Directors and beneficial
owners of more than 10% of the Company's Common Stock are required by
the Commission's regulations to furnish the Company with copies of all
Section 16(a) forms that they file. Based solely on a review of the
copies of such forms furnished to the Company, or written
representations that no reports on Form 5 were required, the Company
believes that for the period from July 1, 1996 through June 30, 1997,
all of its executive officers, Directors and beneficial owners of more
than 10% of the Company's Common Stock complied with Section 16(a)
filing requirements applicable to them.
11
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