SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 19, 1996
Date of Report (Date of earliest event reported)
CHILDREN'S BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-21534 41-1663712
(State or other jurisdiction (Commission File No.) (IRS Employer ID No.)
of incorporation)
724 First Street North
Minneapolis, Minnesota 55401
(Address of principal executive offices)
(612) 338-3300
(Registrant's telephone number, including area code)
The undersigned registrant hereby amends the following items, financial
statements, pro forma financial information and exhibits, if any, or other
portions of its Form 8-K Report filied June 19, 1996, as set forth in the pages
attached hereto.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Financial statements required to be filed pursuant to
Item 7 of Form 8-K filed June 19, 1996, for Radio
Elizabeth, Inc.
(b) Pro Forma Financial Information.
Pro forma financial information required to be filed
pursuant to Item 7 of Form 8-K filed June 19, 1996,
for Children's Broadcasting Corporation.
(c) Exhibits
Consent of Smolin, Lupin & Co., P.A.
RADIO ELIZABETH, INC.
T/A WJDM - 1530 AM
BALANCE SHEETS
ASSETS
December 31 March 31,
1995 1996
(Audited) (Unaudited)
---------- ----------
CURRENT ASSETS:
Cash and Cash Equivalents $ 26,015 $ 169,893
Accounts Receivable 97,998 87,446
Due from Stockholder 252,596 70,073
---------- ----------
Total Current Assets 376,609 327,412
---------- ----------
EQUIPMENT:
Tower Equipment 232,576 246,482
Equipment 137,164 137,164
---------- ----------
Total 369,740 383,646
Less: Accumulated Depreciation 224,025 231,558
---------- ----------
145,715 152,088
---------- ----------
BROADCASTING LICENSE -- 26,351
---------- ----------
TOTAL ASSETS $ 522,324 $ 505,851
========== ==========
LIABILITIES AND STOCKHOLDER'S (DEFICIENCY)
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 132,243 $ 149,316
Payroll Taxes Payable 1,944 6,156
Customer Deposits 2,960 869
Liabilities Subject to Compromise - Current
Portion 83,899 875,727
---------- ----------
Total Current Liabilities 221,046 1,032,068
---------- ----------
LIABILITIES SUBJECT TO COMPROMISE:
Notes Payable in Default 406,640 --
Unsecured Accounts Payable 174,526 --
Accrued Interest on Defaulted Notes 70,536 --
Payroll Taxes Payable 120,400 --
Accrued Penalties and Interest on Payroll
Taxes Payable 33,561 --
---------- ----------
Total Liabilities Subject to Compromise 805,663 --
---------- ----------
COMMITMENTS
STOCKHOLDER'S (DEFICIENCY):
Common Stock - No Par Value; 425 Shares
Authorized; 250 Shares Issued and
Outstanding 75,000 75,000
Accumulated Deficit - Since July 11, 1995 in
Connection with Reorganization (50,273) (72,105)
Accumulated Deficit - Prior to Reorganization (529,112) (529,112)
---------- ----------
(504,385) (526,217)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S
(DEFICIENCY) $ 522,324 $ 505,851
========== ==========
See notes to financial statements.
RADIO ELIZABETH, INC.
T/A WJDM - 1530 AM
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31,
------------------------- -------------------------
1994 1995 1995 1996
(Unaudited) (Audited) (Unaudited) (Unaudited)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE $ 428,673 $ 405,173 $ 45,447 $ 78,964
OPERATING EXPENSES 345,005 421,167 89,957 90,798
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 83,668 (15,994) (44,510) (11,834)
--------- --------- --------- ---------
OTHER INCOME AND (EXPENSE):
Interest Income -- -- 1,309
Interest Expense (41,015) (35,480) (8,965) (11,307)
--------- --------- --------- ---------
(41,015) (35,480) (8,965) (9,998)
--------- --------- --------- ---------
LOSS BEFORE REORGANIZATION ITEMS AND STATE
INCOME TAXES 42,653 (51,474) (53,475) (21,832)
--------- --------- --------- ---------
REORGANIZATION ITEMS:
Interest Earned on Accumulated Cash
Resulting from Chapter 11 Proceedings 194 1,088 317 --
Professional Fees (2,000) (29,839) -- --
--------- --------- --------- ---------
Total Reorganization Items (1,806) (28,751)
LOSS BEFORE STATE INCOME TAXES 40,847 (80,225) (53,158) (21,832)
STATE INCOME TAXES 66 55 52 --
--------- --------- --------- ---------
NET INCOME (LOSS) FOR THE PERIOD $ 40,781 $ (80,280) $ (53,210) $ (21,832)
ACCUMULATED DEFICIT
BALANCE - Beginning (539,886) (499,105) (499,105) (579,385)
--------- --------- --------- ---------
BALANCE - Ending $(499,105) $(579,385) $(552,315) $(601,217)
========= ========= ========= =========
</TABLE>
See notes to financial statements.
RADIO ELIZABETH, INC.
T/A WJDM - 1530 AM
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31,
------------------------- ------------------------
1994 1995 1995 1996
(Unaudited) (Audited) (Unaudited) (Unaudited)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit (Loss) for the Period $ 40,781 $(80,280) $(53,210) $(21,832)
Adjustments to Reconcile Net Loss to Net
Cash Provided by Operating Activities:
Bad Debts Expense 41,382 14,895 -- --
Depreciation 15,073 20,203 3,686 7,532
Net Change in Operating Assets and Liabilities:
Accounts Receivable (55,924) (56,851) 30,725 10,552
Accounts Payable and Accrued Expenses (213,433) 128,687 6,842 17,076
Payroll Taxes Payable (171,356) (246) 3,220 4,212
Customer Deposits (173) 480 2,088 (2,091)
State Income Taxes Payable 41 (41) 52 --
Unsecured Accounts Payable - Subject to
Compromise 211,095 (12,769) -- (6,373)
Accrued Interest on Defaulted Notes - Subject
to Compromise 24,415 8,780 7,165 3,807
Payroll Taxes Payable - Subject to
Compromise 172,169 (21,669) -- (11,269)
Accrued Penalties and Interest on Payroll
Taxes Payable - Subject to Compromise 16,603 15,920 3,982 --
-------- -------- -------- --------
Net Cash Provided by Operating Activities 80,673 17,109 4,550 1,614
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Broadcasting License -- -- -- (26,351)
Purchase of Tower Equipment -- (83,583) -- (13,908)
Loan to Stockholder -- (16,963) -- (57,477)
Repayment by Stockholder -- 20,000 -- 240,000
-------- -------- -------- --------
Net Cash Provided by (Used by)
Investing Activities -- (80,546) -- 142,264
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 80,673 (63,437) 4,550 143,878
CASH AND CASH EQUIVALENTS - Beginning 8,779 89,452 89,452 26,015
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS - Ending $ 89,452 $ 26,015 $ 94,002 $169,893
======== ======== ======== ========
</TABLE>
See notes to financial statements.
RADIO ELIZABETH, INC.
T/A WJDM - 1530 AM
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995 (AUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business:
Radio Elizabeth, Inc. T/A WJDM - 1530 AM is a 1,000 watt AM
radio station broadcasting during daylight hours. The station reaches
approximately 1.9 million people in eight Northern New Jersey Counties,
Staten Island, parts of Brooklyn, Upper West Manhattan and Eastern
Queens. During August of 1994, Radio Elizabeth, Inc. T/A WJDM - 1530 AM
changed its broadcasting format from golden oldies to ethnic and
religious programming.
Bankruptcy Petition:
On November 1, 1993, Radio Elizabeth, Inc. T/A WJDM - 1530 AM
filed a petition for relief under Chapter 11 of the Federal Bankruptcy
Code. Under Chapter 11, certain claims against the Debtor in existence
prior to the filing are stayed while the Debtor continues business as a
Debtor in Possession. These claims are reflected in the balance sheet
as "Liabilities Subject to Compromise". A Plan of Reorganization was
approved July 11, 1995 (see Note 8).
Cash and Cash Equivalents:
Management considers all highly liquid debt instruments
purchased with a maturity of ninety days or less to be cash equivalents
(see Note 2).
Accounts Receivable:
The Company makes no provision for doubtful accounts. When an
account becomes uncollectible, it is then charged directly to current
operations. The Company's management believes that all material
accounts receivable will be collected.
Property and Equipment:
Property and Equipment are recorded at cost and are being
depreciated over their estimated useful lives using both accelerated
and straight-line methods.
Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
NOTE 2 - CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consist of the following:
December 31, March 31,
1995 1996
------- --------
Operating Accounts $(4,176) $ 6,321
Money Market - United Jersey Bank
interest approximately 2.2% 30,191 12,432
Certificate of Deposit - United
Jersey Bank, interest approximately
4.90% -- 151,140
------- --------
TOTAL $26,015 $169,893
===== ======= ========
NOTE 3 - DUE FROM STOCKHOLDER:
Monies advanced to the stockholder of the Corporation do not
bear interest and are expected to be repaid within the current year
(see Note 9).
NOTE 4 - LIABILITIES SUBJECT TO COMPROMISE:
On November 1, 1993, Radio Elizabeth, Inc. T/A WJDM - 1530 AM
filed a petition for relief under Chapter 11 of the Federal Bankruptcy
Code. These claims are as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
<S> <C> <C>
Notes Payable in Default:
Note Payable - Summit Bank - with interest at 2% above the bank's
prime rate secured by accounts receivable, equipment, the
stockholder's personal residence in Springfield, New Jersey, and
an apartment unit in New York City, and prohibits the issuance of
any additional common stock without the prior written consent of
the bank. $350,000 $350,000
Note Payable - Summit Bank - with interest at 2% above the bank's
prime rate secured by accounts receivable, equipment, the
stockholder's personal residence in Springfield, New Jersey, and
an apartment unit in New York City, and prohibits the issuance of
any additional common stock without the prior written consent of
the bank. 50,000 50,000
Note Payable - Summit Bank - with interest at 2% above the bank's
prime rate secured by accounts receivable, equipment, the
stockholder's personal residence in Springfield, New Jersey, and
an apartment unit in New York City and prohibits the issuance of
any additional common stock without the prior written consent of
the bank. 6,640 6,640
Accrued Interest on Defaulted Notes 100,536 104,343
-------- --------
Total Secured Claims $507,176 $510,983
Unsecured Accounts Payable $198,325 $191,953
December 31, March 31,
1995 1996
Payroll Taxes Payable $150,500 $139,230
Accrued Penalties and Interest on
Payroll Taxes Payable 33,561 33,561
-------- --------
Total Liabilities Subject To Compromise 889,562 875,727
Less: Current Portion 83,899 875,727
-------- --------
Total Liabilities Subject to
Compromise - Long-Term $805,663 $ -
======== ========
</TABLE>
NOTE 5 - COMMITMENTS:
The Company leases its operating facilities on a
month-to-month basis at $1,675, per month. The Company leases parking
facilities on a month-to-month basis at $100, per month. The Company
also leases its tower transmitting site under a long-term lease
expiring March 2000 with a CPI index adjustment after every five years.
The current monthly base rent is $437. Rent expense was $6,508 and
$27,475 for the three months ended March 31, 1996 and the year ended
December 31, 1995, respectively.
The Company's future minimum lease payments under the above
lease agreement are as follows:
Period Ended
March 31,
------------
1997 $ 5,244
1998 5,244
1999 5,244
2000 1,311
-------
$17,043
The Company has also entered into contracts to purchase
additional tower equipment for the 1660 AM band. The total due on these
contracts at March 31, 1996 is $21,077. This amount is included in
accounts payable and accrued expenses.
NOTE 6 - INCOME TAXES:
The Company, as of March 31, 1996, has unused Federal and
State operating loss carryforwards of approximately $350,296 and
$352,270, which may be applied against future taxable income expiring
in 2008 and 2001, respectively.
NOTE 7 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest was $7,500 for the three months ended
March 31, 1996 and $26,700 for the year ended December 31, 1995. Cash
paid for state income taxes was $97 for the year ended December 31,
1995.
NOTE 8 - PLAN OF REORGANIZATION:
On July 11, 1995, the Bankruptcy Court confirmed the Company's
Plan of Reorganization. The confirmed plan provides for the following:
Secured Debt:
The Company secured debt of $510,983, including accrued
interest, to Summit Bank at March 31, 1996, is currently being
satisfied by a $10,000 payment upon confirmation of Debtor's Plan and
the remaining balance is being paid in monthly installments of $2,500,
which commenced one month after confirmation of Debtor's Plan. As of
the report date, Radio Elizabeth, Inc. T/A WJDM - 1530 has paid $30,000
to Summit Bank.
Priority Tax Claims:
Payroll and withholding taxes of $172,791, including accrued
penalties and interest at March 31, 1996, are currently being satisfied
by a $10,000 payment to the Internal Revenue Service and $400 to the
State of New Jersey and the remaining balances of both claims will be
paid at the rate of 1/60 of said claims for 60 consecutive months
payable quarterly. As of the report date, Radio Elizabeth, Inc. T/A
WJDM - 1530 AM has paid $31,959 to the Internal Revenue Service and
$980 to the State of New Jersey.
Unsecured General Creditors:
The $191,953 claims of general unsecured creditors at March
31, 1996, are currently being paid 3% of their respective claims
quarterly until such claims will be paid in full as filed with the
Bankruptcy Court. As of the report date, Radio Elizabeth, Inc. T/A WJDM
- 1530 AM has paid $19,427 to general unsecured creditors.
Common Stock:
No dividends will be paid upon common stock as long as claims
of creditors remain unpaid.
Anticipated Payment Provision:
The Company is the holder of a 1,000 watt broadcasting license
issued by the Federal Communications Commission which permits only
daytime broadcasting. The Federal Communications Commission has issued
the Company a STA 10,000 watt daytime, 1,000 watt night time
broadcasting license on the expanded band 1660 AM. The Company is
waiting for the final license for this 1660 AM band from the Federal
Communications Commission (see Note 9). The Company will pay the
balance owing to creditors upon a sale of its station and will apply
70% of any lease proceeds to payment of its creditors in the following
order:
1. To the secured claims of Summit Bank.
2. To the payment of the balance owing for taxes to the
Internal Revenue Service and the State of New Jersey.
3. To the balance owing unsecured creditors.
As of the report date, Radio Elizabeth, Inc. T/A WJDM - 1530
AM has fulfilled all of its obligations under the terms of the Plan of
Reorganization as approved by the Bankruptcy Court (see Note 9).
NOTE 9 - SUBSEQUENT EVENTS:
The Company's stockholder has entered into an agreement to
sell his common stock to Children's Broadcasting Corporation of
Minneapolis, Minnesota for $10,000,000 payable at closing. A portion of
the proceeds will be used to fully satisfy all outstanding debt to the
company, and repay the stockholder loan (see Notes 3 and 8). It is the
intention of Children's Broadcasting Corporation to use the expanded
1660 AM Band to broadcast its children radio programming which is
directed to pre-teenage children and their families. The current
stockholder will be allowed to continue to operate the 1530 AM Band up
to a maximum of five years as permitted by the Federal Communications
Commission under a LMA to be entered into at closing.
Unaudited pro forma financial position as if the acquisitions had
occurred March 31, 1996 would be:
<TABLE>
<CAPTION>
Radio Pro forma Combined Wolphin Pro forma
CBC Elizabeth Adjustments Total Broadcasting Adjustments Total
----------- ---------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 1996:
Current assets $16,868,827 $ 327,412 $ -- $17,196,239 $ 57,729 $ (57,729)(2) $17,196,239
Deffered expenses 1,978,890 1,978,890 1,978,890
Property and equipment 3,033,401 152,088 137,912 (1) 3,323,401 8,588 306,412 (2) 3,638,401
Broadcast licenses 4,913,259 26,351 10,801,688 (1) 15,741,298 273,465 911,535 (2) 16,926,298
Other assets 1,305,215 1,305,215 1,305,215
----------- ---------- ----------- ----------- ---------- ---------- -----------
Total assets $28,099,592 $ 505,851 $10,939,600 $39,545,043 $ 339,782 $1,160,218 $41,045,043
=========== ========== =========== =========== ========== ========== ===========
Current liabilities $ 3,062,072 $1,032,068 $(1,032,168)(1) $ 3,061,972 $ 74,805 $ (74,805)(2) $ 3,061,972
Long-term debt 662,447 662,447 662,447
Other liabilities 50,899 50,899 50,899
Redeemable convertible 0
preferred stock 2,286,386 2,286,386 2,286,386
Shareholders' equity (deficit) 22,037,788 (526,217) 11,971,768 (1) 33,483,339 264,977 1,235,023 (2) 34,983,339
----------- ---------- ----------- ----------- ---------- ---------- -----------
Total liabilities and
shareholders' equity $28,099,592 $ 505,851 $10,939,600 $39,545,043 $ 339,782 $1,160,218 $41,045,043
=========== ========== =========== =========== ========== ========== ===========
</TABLE>
Pro forma adjustments to financial position:
(1) Purchase accounting adjustments associated with the acquisition of Radio
Elizabeth, Inc.,including: (i) adjustment of property and equipment to a fair
market value of $290,000 (ii) seller obligation to repay all liabilities out of
the proceeds of the sale totalling $1,032,068 at March 31, 1996; (iii) common
stock valued at $11,500,000 to be issued to finance the purchase and (iv)
$10,828,039 of broadcast license value purchased, allocated $750,000 to 1530 AM
and $10,087,039 to 1660 AM.
(2) Purchase accounting adjustments associated with the acquisition of Wolpin
Broadcasting Company,including: (1) seller to retain title to all current assets
(ii) adjustment of existing property and equipment to a fair market value of
$75,000 and record land purchased in conjunction with the acquisition valued at
$240,000 (iii) $1,185,000 of broadcast license value purchased (iv) seller
obligation to repay all liabilities out of the proceeds of the sale totalling
$74,805 at March 31, 1996; and (iii) common stock valued at $1,500,000 to be
issued to finance the purchase.
<TABLE>
<CAPTION>
Children's Radio Pro Forma Wolpin Pro Forma
Broadcasting Elizabeth, Pro Forma Including Broadcasting Pro Forma Including
Corporation Inc. Adjustments REI Company Adjustments REI and WPC
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1995:
Revenues $ 5,106,545 $ 405,173 $ (405,173)(1) $ 5,112,545 $ 566,041 $ $ 5,678,586
6,000 (4) --
Operating expenses 10,006,059 421,167 (421,167)(1) 10,006,059 475,028 66,275(5) 10,547,362
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations (4,899,514) (15,994) 21,994 (4,893,514) 91,013 (66,275) (4,868,776)
Reorganization items (28,751) 28,751 (1) -- -- -- --
Interest expense, net (1,208,263) (35,480) 35,480 (1) (1,208,263) -- -- (1,208,263)
Income taxes (55) 55 (1) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (loss) $(6,107,777) $ (80,280) $ 86,280 $(6,101,777) $ 91,013 $ (66,275) $(6,077,039)
=========== =========== =========== =========== =========== =========== ===========
Net loss per share $ (2.22) ($ 1.59)
=========== ===========
Weighted average number
of shares outstanding 2,815,500 3,815,500
=========== ===========
Three Months Ended March 31, 1996:
Revenues $ 1,216,023 $ 78,964 $ (78,964)(1) $ 1,217,523 $ 106,674 $ -- $ 1,324,197
1,500 --
Operating expenses 2,823,990 90,798 (90,798)(1) 2,823,990 121,785 85,781 3,031,556
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations (1,607,967) (11,834) 13,334 (1) (1,606,467) (15,111) (85,781) (1,707,359)
Reorganization items -- -- -- -- -- --
Interest expense, net (267,906) (9,998) 9,998 (1) (267,906) -- (267,906)
Income taxes -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (loss) $(1,875,873) $ (21,832) $ 23,332 $(1,874,373) $ (15,111) $ (85,781) $(1,975,265)
=========== =========== =========== =========== =========== =========== ===========
Net loss per share $ (0.63) $ (0.50)
=========== ===========
Weighted average number
of shares outstanding 3,062,500 4,062,500
=========== ===========
</TABLE>
Pro forma adjustments to operations:
(1) Eliminate the revenue and operating expenses related to the
operation of radio station WJDM 1530 AM to give effect for the local
programming agreement.
(2) The acquired broadcast license for 1660 AM valued at $10,078,039
will be amortized over an estimated useful life of 20 years
beginning with the issuance of a license covering the new 1660 AM
frequency. As a result, no pro forma adjustment has been recorded
for amortization expense associated with the purchase broadcast
license.
(3) LMA fees to be paid by CBC to the seller of $80,000 per month, will
begin with the commencement of broadcast operations on the new 1660
AM frequency and continue until FCC approval for the transfer of the
broadcast license is received by CBC. As a result, no pro forma
adjustment has been recorded for this expense.
(4) LMA fee of $500 per month paid by the seller to CBC for the
continued rights to broadcast on 1530 AM.
(5) Reflects an adjustment to depreciation and amortization expense
related to property and equipment and broadcast licenses acquired
from Wolpin Broadcasting Company as if the transaction had occurred
on January 1, 1995. Straight-line depreciation is calculated over
eight years for equipment and the broadcast license is amortized
over a twenty year life.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHILDREN'S BROADCASTING
CORPORATION
Date: June 21, 1996 By /s/ James G. Gilbertson
-----------------------
James G. Gilbertson
Executive Vice President and Chief
Financial Officer
Children's Broadcasting Corporation
724 First Street North, 4th Floor
Minneapolis, Minnesota 55401
Gentlemen:
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports for the two years ended December 31, 1994 and 1995, and the
three months ended March 31, 1996, with respect to the financial statements of
Radio Elizabeth, Inc. incorporated by reference in the Registration Statement
(Form S-3) and related Propsectus of Children's Broadcasting Corporation for
the registration of shares of its common stock.
/s/ SMOLIN, LUPIN & CO., P.A.
West Orange, New Jersey
June 20, 1996
