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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB/A
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
|_| TRANSACTION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 0-21534
CHILDREN'S BROADCASTING CORPORATION
(Name of Small Business Issuer in Its Charter)
MINNESOTA 41-1663712
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
724 FIRST STREET NORTH, MINNEAPOLIS, MINNESOTA 55401
(Address of Principal Executive Offices, including Zip Code)
(612) 338-3300
(Issuer's Telephone Number, including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK ($0.02 PAR VALUE)
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|
The issuer's revenues for its most recent fiscal year were
$5,854,441.
The aggregate market value of the voting stock held by
non-affiliates of the issuer as of March 9, 1998 was approximately $19,176,854.
The number of shares of the common stock of the issuer outstanding
as of March 9, 1998 was 6,649,865.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE>
TABLE OF CONTENTS
Page
----
PART III.......................................................................1
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT..................1
ITEM 10 EXECUTIVE COMPENSATION.............................................3
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....5
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................7
ITEM 13 EXHIBITS, LIST AND REPORTS ON FORM 8-K.............................8
SIGNATURES ..................................................................11
<PAGE>
PART III
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Set forth below is certain information concerning the management of
Children's Broadcasting Corporation (the "Company") as of May 15, 1998.
MANAGEMENT
Name Age Position
- ------------------- --- -------------------------------------------------
Christopher T. Dahl 54 Chairman of the Board of Directors, President and
Chief Executive Officer
James G. Gilbertson 36 Chief Operating Officer and Treasurer
Patrick D. Grinde 72 Chief Financial Officer
Lance W. Riley 47 General Counsel and Secretary
Gary W. Landis 44 Executive Vice President of Programming
Barbara A. McMahon 42 Executive Vice President of Affiliate Relations
Rick E. Smith 36 Executive Vice President of National Sales
Richard W. Perkins 67 Director
Michael R. Wigley 44 Director
William E. Cameron 54 Director
CHRISTOPHER T. DAHL has been President, Chief Executive Officer and
Chairman of the Company since its inception in February 1990. Mr. Dahl is also
Chairman and Chief Executive Officer of Community Airwaves Corporation ("CAC"),
a company that owns and operates radio stations in Hawaii. Prior to founding CAC
in 1986, Mr. Dahl managed his private investments. Mr. Dahl also serves as a
director of Radio Management Corporation ("RMC"), a company that provides
corporate, legal, accounting and financial services to the Company, CAC and
Harmony Holdings, Inc. ("Harmony"). From 1969 to 1979, he was the founder and
President of a group of companies involved in photofinishing, retail photo
sales, home sewing notions, toy distribution and retail craft stores. He was
employed by Campbell-Mithun and Knox Reeves Advertising from 1965 through 1969.
Mr. Dahl serves as President, Chief Executive Officer and Chairman of Harmony,
of which the Company is the largest shareholder. Harmony produces television
commercials, music videos and related media.
JAMES G. GILBERTSON has served as the Company's Chief Operating
Officer since April 1996 and its Chief Financial Officer from July 1992 through
April 1998. From June 1988 to July 1992, he was the Chief Financial Officer
of Parker Communications, which operated a group of radio stations. From 1985 to
June 1988, he was Controller of the radio division of Palmer Communications
located in Des Moines, Iowa. Prior to joining Palmer Communications, Mr.
Gilbertson was a practicing certified public accountant with the firm of Ernst &
Young LLP. Mr. Gilbertson is also an executive officer of Harmony.
PATRICK D. GRINDE became the Chief Financial Officer of the Company
in April 1998. Since July 1992, Mr. Grinde has held various positions at
SuperPower, Incorporated, including President and Chief Financial Officer. From
1973 to 1992, Mr. Grinde held various executive officer positions in commercial
banks.
LANCE W. RILEY became the General Counsel and Secretary of the
Company in March 1994. Mr. Riley has been practicing law since 1977. His primary
area of practice is radio broadcasting and he held the position of Chairman of
the Communications Law Section of the Minnesota Bar Association from 1990 to
1994. Mr. Riley has been Of Counsel with the firm of Hessian & McKasy, P.A.
(f/k/a Hessian, McKasy & Soderberg, P.A.) since 1994. Prior to joining the
Company, Mr. Riley was partner in the firm of Courey, Albers, Gilbert and Riley
P.A. Mr. Riley is also an officer of Harmony.
<PAGE>
GARY W. LANDIS has served as the Company's Vice President of
Programming since December 1992 and became an Executive Vice President in July
1994. From 1985 to 1992, Mr. Landis served as Vice President of Programming for
Westwood One, the second largest radio network company in the U.S. Between 1982
and 1985, Mr. Landis served as Director of Programming for the RKO Radio
Networks.
BARBARA A. MCMAHON joined the Company in June 1993 to oversee the
growth of the network through affiliates and was promoted to Executive Vice
President of Affiliate Relations in June 1996. During the years 1980 through
1989, Ms. McMahon served as Director for NBC Radio Networks, Mutual Broadcasting
and RKO Radio Networks.
RICK E. SMITH became the Company's Executive Vice President of
National Sales in October 1996. From September 1994 to April 1995, he served as
Affiliate Relations Manager and then assumed the position of Marketing Manager.
Mr. Smith served as Vice President of Sales and Marketing for Uncle B's Bakery,
a national food manufacturer, from 1989 to 1994.
RICHARD W. PERKINS has been a director of the Company since its
inception. For more than five years, Mr. Perkins has been President and Chief
Executive Officer of Perkins Capital Management, Inc. ("PCM"), a registered
investment advisor. Mr. Perkins is also a director of CAC and RMC as well as the
following publicly held companies: Bio-Vascular, Inc., a medical products
manufacturer; CNS, Inc., a consumer products manufacturer; Eagle Pacific
Industries, Inc., a manufacturer of plastic pipe; Harmony; LifeCore Biomedical,
Inc., a medical device manufacturer; Nortech Systems, Inc., an electronic
sub-systems manufacturer; Quantech LTD., a developer of immunological tests; and
Vital Images, Inc., a medical visualization software company.
MICHAEL R. WIGLEY was elected to the Company's Board of Directors in
February 1998 to fill a vacancy and to serve until the next Annual Meeting of
Shareholders. Mr. Wigley is President and Chief Executive Officer of Great
Plains Companies, Inc. ("Great Plains"), a building material and supply company
based on Roseville, Minnesota. He has served as its President since 1989. Mr.
Wigley is Chairman and Chief Executive Officer of four subsidiaries of Great
Plains, as well as Chairman and Chief Executive Officer of Great Plains
Properties, Inc. and TerraDek Lighting, Inc., two independent privately-held
companies. Mr. Wigley is also a director of Choicetel Communications, Inc., the
largest independent payphone service provider in Minnesota. He co-founded the
Minnesota branch of McKinsey & Company, where he managed various teams of
consultants from 1986 to 1989. Mr. Wigley holds a M.B.A. from Harvard University
and a M.S. in Civil Engineering from Stanford University.
WILLIAM E. CAMERON was elected to the Company's Board of Directors
in April 1998 to fill a vacancy and to serve until the next Annual Meeting of
Shareholders. Since 1993, Mr. Cameron has been the head of International
Business Development for Universal Health Communications, the largest
medical-health-wellness video library in the world. After spending ten years in
London, England, Mr. Cameron relocated this year to Los Angeles, California, to
take over International Telemedicine Marketing for KZT Corporation, the creators
of the video phone. Mr. Cameron also serves as a director of Harmony and RME
Entertainment.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who own more than 10% of
a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Such officers, directors and shareholders are required by
the Commission to furnish the Company with copies of all such reports. To the
Company's knowledge, based solely on a review of copies of reports filed with
the Commission during 1997, all applicable Section 16(a) filing requirements
were satisfied.
<PAGE>
ITEM 10 EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid
to or accrued by each of the Company's executive officers receiving in excess of
$100,000 (the "Named Executive Officers") for services rendered to the Company
and its subsidiaries during the fiscal years ended December 31, 1997, 1996 and
1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION (1) AWARDS
----------------------- ----------------------
NAME AND SECURITIES UNDERLYING
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS
- --------------------------------- -------- ----------- --------- ----------------------
<S> <C> <C> <C> <C>
Christopher T. Dahl 1997 241,250(2) 15,000(2) 37,500(3)
President and Chief 1996 210,000 56,500 150,000(4)(5)
Executive Officer 1995 210,000 12,500 41,250(6)
Rick E. Smith 1997 151,154 - 27,000(7)
Executive Vice President of 1996 79,849 1,000 38,000(8)
National Sales 1995 48,170 - 7,500(9)
James G. Gilbertson 1997 123,500 7,500 25,000(3)
Chief Operating Officer 1996 123,500 55,875 100,000(5)(10)
1995 97,500 17,500 25,000(11)(12)
Denny J. Manrique (13) 1997 122,655 6,000 9,000(3)
Executive Vice President of 1996 117,023 1,000 43,000(14)
Sales Development 1995 101,082 - -
Lance W. Riley 1997 118,750 7,500 12,500(3)
General Counsel and Secretary 1996 110,833 42,500 75,000(5)(15)
1995 95,000 15,000 40,000(16)
</TABLE>
- ---------------
(1) Includes, in the case of Messrs. Gilbertson and Riley, compensation paid
by RMC and Harmony for administrative management and professional services
rendered to the Company and Harmony.
(2) Includes compensation paid by Harmony for services rendered to Harmony
from July 1997 through December 1997.
(3) Option grants at $3.50 per share pursuant to the Company's 1994 Stock
Option Plan.
(4) Option grant of 50,000 shares at $5.88 per share and 75,000 shares at
$3.50 per share pursuant to the Company's 1994 Stock Option Plan.
(5) Non-qualified grant of options for 25,000 shares at $5.88 per share.
(6) Non-qualified grant of options for 41,250 shares at $7.70 per share.
(7) Option grant of 18,000 shares at $3.50 per share pursuant to the Company's
1991 Incentive Stock Option Plan and 9,000 shares at $3.50 per share
pursuant to the Company's 1994 Stock Option Plan.
(8) Option grant of 20,000 shares at $8.38 per share and 18,000 shares at
$3.50 per share pursuant to the Company's 1994 Stock Option Plan.
(9) Option grant of 7,500 shares at $12.00 per share pursuant to the Company's
1994 Stock Option Plan.
(10) Option grant of 25,000 shares at $5.88 per share and 5,000 shares at $3.50
per share pursuant to the Company's 1994 Stock Option Plan.
(11) Option grant of 12,500 shares at $7.26 per share pursuant to the Company's
1991 Incentive Stock Option Plan.
(12) Option grant of 12,500 shares at $7.26 per share pursuant to the Company's
1994 Stock Option Plan.
(13) Mr. Manrique's employment with the Company terminated on February 1, 1998.
(14) Option grant of 25,000 shares at $8.38 per share and 18,000 shares at
$3.50 per share pursuant to the Company's 1994 Stock Option Plan.
(15) Option grant of 25,000 shares at $5.88 per share and 25,000 shares at
$3.50 per share pursuant to the Company's 1994 Stock Option Plan.
<PAGE>
(16) Option grant of 25,000 shares at $7.25 per share pursuant to the Company's
1991 Incentive Stock Option Plan and non-qualified options of 15,000
shares at $9.50 per share.
The following table sets forth the number of securities underlying
options granted in1997, the percent the grant represents of the total options
granted to employees during such fiscal year, the per-share exercise price of
the options granted, and the expiration date of the options for the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN FISCAL EXERCISE PRICE(1)
NAME GRANTED (#) YEAR (%) ($/SHARE) EXPIRATION DATE
- ------------------------------ ------------------ ------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Christopher T. Dahl........... 37,500 18.8 3.50 6/2/02
Rick E. Smith................. 9,000 4.5 3.50 6/2/02
18,000 9.0 3.50 9/22/02
James G. Gilbertson........... 25,000 12.5 3.50 6/2/02
Denny J. Manrique............. 9,000 4.5 3.50 6/2/02
Lance W. Riley................ 12,500 6.3 3.50 6/2/02
</TABLE>
- -----------------
(1) Fair market value on the date of grant, in accordance with the Company's
1994 Stock Option Plan.
The following table sets forth certain information regarding options
exercised by the Named Executive Officers during 1997 and the number and value
of unexercised in-the-money options for the Named Executive Officers at December
31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END YEAR END ($)(1)
SHARES VALUE ----------------- --------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------- ----------- -------- ----------------- --------------------
<S> <C> <C> <C> <C>
Christopher T. Dahl............... 25,000 45,313 80,625/198,125 17,150/45,850
Rick E. Smith..................... - - 34,100/38,650 5,796/19,404
James G. Gilbertson............... 10,750 18,141 57,917/129,583 11,433/30,567
Denny J. Manrique................. - - 25,406/26,594 4,116/11,004
Lance W. Riley.................... - - 45,208/107,292 5,717/15,283
</TABLE>
- -----------------
(1) Market value of underlying securities at fiscal year end minus the
exercise price.
<PAGE>
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains certain information as of May 15, 1998,
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each director, nominee for director and executive officer of
the Company and (iii) the executive officers of the Company and directors as a
group, and as to the percentage of the outstanding shares held by them on such
date. Any shares which are subject to an option or a warrant exercisable within
60 days are reflected in the following table and are deemed to be outstanding
for the purpose of computing the percentage of Common Stock owned by the option
or warrant holder but are not deemed to be outstanding for the purpose of
computing the percentage of Common Stock owned by any other person. Unless
otherwise noted, each person identified below possesses sole voting and
investment power with respect to such shares. The business address of Messrs.
Dahl, Gilbertson, Riley, Landis, Smith, Grinde and Ms. McMahon is 724 First
Street North, Minneapolis, Minnesota 55401.
SHARES PERCENT
BENEFICIALLY OF
OWNED(1) CLASS
------------- -------
Perkins Capital Management, Inc.................. 1,609,771(2) 24.1%
730 East Lake Street
Wayzata, Minnesota 55391
Heartland Advisors, Inc.......................... 1,395,100(3) 20.9%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Christopher T. Dahl.............................. 556,416(4) 8.2%
Richard W. Perkins............................... 480,359(5) 7.0%
730 East Lake Street
Wayzata, Minnesota 55391
Foothill Capital Corporation..................... 450,000(6) 6.3%
11111 Santa Monica Boulevard
Los Angeles, California 90025
James G. Gilbertson.............................. 59,929(7) *
Gary W. Landis................................... 27,244(8) *
Lance W. Riley................................... 28,799(8) *
Barbara A. McMahon............................... 24,404(8) *
Rick E. Smith.................................... 24,670(8) *
Michael R. Wigley................................ 6,250(8) *
William E. Cameron............................... 0 0
Patrick D. Grinde................................ 0 0
All Directors and Executive Officers
as a Group (10 persons)................... 1,208,071(9) 16.9%
- --------------
* Less than 1%
(1) Securities "beneficially owned" by a person are determined in accordance
with the definition of "beneficial ownership" set forth in the regulations
of the Commission and, accordingly, may include securities owned by or
for, among others, the spouse, children or certain other relatives of such
person as well as other securities as to which the person has or shares
voting or investment power or has the option or right to acquire Common
Stock within 60 days.
(2) Based upon statements filed with the Commission, PCM is a registered
investment adviser of which Richard W. Perkins, a director of the Company,
is President. As set forth in Schedule 13G filed with the Commission on
February 11, 1998, PCM has the sole right to sell such shares and has sole
voting power over 70,286 of such shares. Mr. Perkins and PCM disclaim any
beneficial interest in such shares. Excludes shares beneficially owned by
Mr. Perkins.
(3) Based upon statements filed with the Commission, such shares are held in
investment advisory accounts. As a result, various persons have the right
to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, such shares. Includes 590,000 shares held by
Heartland Value Fund, a series of Heartland Group, Inc., a registered
investment company. Includes 1,197,100 shares over which Heartland
Advisors, Inc. claims sole voting power, and 1,395,100 shares over which
sole dispositive power is claimed.
(4) Includes 95,930 shares purchasable upon the exercise of options and
warrants.
(5) Includes (i) 239,690 shares owned directly by Mr. Perkins, (ii) 6,769
shares beneficially owned by Mr. Perkins through Perkins Capital
Management, Inc. Profit Sharing Plan and Trust and Perkins Foundation,
(iii) 228,275
<PAGE>
shares purchasable upon the exercise of options and warrants by Mr.
Perkins and (iv) 5,625 shares purchasable upon the exercise of warrants by
Perkins Capital Management, Inc. Profit Sharing Plan and Trust and Perkins
Foundation. Mr. Perkins has the sole right to sell such shares and has
sole voting power over 239,690 of such shares. Mr. Perkins' beneficial
ownership excludes shares held for the accounts of clients of PCM.
(6) Represents shares purchasable upon the exercise of warrants.
(7) Includes 44,679 shares purchasable upon the exercise of options.
(8) Represents shares purchasable upon the exercise of options or warrants.
(9) Includes 485,876 shares purchasable upon exercise of options and warrants.
<PAGE>
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASES
The studios and tower site of WWTC(AM) and KYCR(AM) are located in
St. Louis Park, Minnesota. The studio facility consists of approximately 12,000
square feet. The tower site includes four 200-foot towers, a transmitter
building and a storage garage on approximately 16 acres. The tower site is
leased from Mr. Dahl at a total annual rent of approximately $114,000, and the
studio site is leased from a partnership consisting of Messrs. Dahl and Perkins
at an annual rent of approximately $132,000.
In January 1996, the Company entered into a five-year lease with 724
Associates, a partnership consisting of Messrs. Dahl, Perkins and Stephen L.
Wallack, a shareholder of the Company, for 6,000 square feet of office space at
724 North First Street, Minneapolis, Minnesota. These facilities are leased at
annual rental of $54,000 and house the Company's executive offices. The
executive offices are adjacent to the offices of CAC and RMC. CAC is owned and
controlled by Messrs. Dahl, Perkins and Russell Cowles II, either directly or
through trusts. RMC is owned by Messrs. Dahl, Perkins and Cowles. Mr. Cowles, a
former director-elect of the Company, is a beneficiary and trustee of the John
Cowles Family Trust, a shareholder of the Company. Under the terms of each of
the leases, the Company is obligated to pay its proportionate share of repairs
and maintenance. These arrangements were approved by the Related Party
Transaction Committee of the Company's Board of Directors, which is comprised of
disinterested directors, and the Company believes such arrangements were on
terms at least as favorable as could have been obtained from unaffiliated third
parties.
MANAGEMENT SERVICES FROM AN AFFILIATE
Since July 1993, the Company has received administrative, legal and
accounting services from RMC. RMC is a company owned by the Chairman of the
Board, President and Chief Executive Officer of the Company, another director
and a shareholder. RMC provides corporate, legal, accounting and financial
services to the Company, CAC and Harmony. CAC is a separate private company also
owned by the individuals described above. The Company pays a set monthly fee of
$75,000 for the services listed above. All outside services directly
attributable to the Company are billed directly to the Company. The Company paid
RMC an aggregate of $750,000 for such services during the fiscal year ended
December 31, 1996 and an aggregate of $900,000 for such services during the
fiscal year ended December 31, 1997. The salaries of two officers of the
Company, Messrs. Riley and Gilbertson, are paid by RMC. These arrangements were
approved by the Related Party Transaction Committee of the Company's Board of
Directors, which is comprised of disinterested directors, and the Company
believes such arrangements were on terms at least as favorable as could have
been obtained from unaffiliated third parties.
HARMONY-RELATED TRANSACTIONS
In connection with the July 1997 acquisition by the Company of
shares of common stock of Harmony, the Company borrowed an aggregate of $1.25
million from three parties: Rodney P. Burwell, a former director of the Company,
Pyramid Partners, L.P., an entity of which PCM is the managing partner, and
William M. Toles, a shareholder of the Company. Mr. Perkins, a director of the
Company, is President and Chief Executive Officer of PCM. Messrs. Perkins and
Toles are members of the Board of Directors of Harmony. Their loans are
evidenced by notes bearing interest at 10% per year, payable on July 25, 1998.
Additionally, warrants to purchase an aggregate of 125,000 shares of Common
Stock at $4.00 per share were issued to those lenders.
Messrs. Dahl and Perkins are directors of Harmony, an entity of
which the Company is the largest shareholder. In January 1998, the Company
received proceeds of $611,000 and paid debt issuance costs of $39,000 through
the issuance of a note payable to Harmony with a face amount of $650,000. The
note payable bears interest at 15%, is unsecured and is due upon demand. In May
1998, the Company repaid $322,863 of principal on the note and $36,062 of
interest which had accrued through May 21, 1998.
<PAGE>
In April 1998, the Company assigned to Pyramid Partners, L.P.;
Perkins & Partners, Inc., Profit Sharing Plan & Trust; and Christopher T. Dahl &
State of New Prague Joint Account of all of its right to purchase 225,000 shares
of common stock of Harmony at $2.50 per share from Glenn B. Laken, a shareholder
of Harmony.
OTHER
Lance W. Riley, Secretary and General Counsel of the Company, has an
of counsel relationship with Hessian & McKasy, P.A. ("HMPA"). HMPA is one of the
law firms which represents the Company in connection with the ABC/Disney
litigation. During 1997, the Company paid HMPA legal fees of $883,749 and
disbursements of $106,480.
ITEM 13 EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation, as amended and restated (incorporated
by reference to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996 (File No. 0-21534) filed on
March 31, 1997).
3.2 Amended and Restated Bylaws (incorporated by reference to the
Company's Registration Statement on Form S-18 (File No. 33-44412)
filed on December 5, 1991).
4.1 Rights Agreement between the Company and Norwest Bank Minnesota,
National Association, as Rights Agent, dated as of February 19,
1998 (incorporated by reference to the Company's Registration
Statement on Form 8-A (File No. 0-21534) filed on February 20,
1998).
10.1 1991 Incentive Stock Option Plan (incorporated by reference to the
Company's Registration Statement on Form S-18 (File No. 33-44412)
filed on December 5, 1991).
10.2 Lease between the Company and 5501 Building Company dated November
1, 1996 (incorporated by reference to the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1996 (File
No. 0-21534) filed on March 31, 1997).
10.3 Lease between the Company and 724 Associates dated November 1,
1996 (incorporated by reference to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1996 (File No.
0-21534) filed on March 31, 1997).
10.4 Management Services Agreement between the Company and Radio
Management Corporation dated February 22, 1997 (incorporated by
reference to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996 (File No. 0-21534) filed on
March 31, 1997).
10.5 1994 Stock Option Plan (incorporated by reference to the Company's
Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996 (File No. 0-21534) filed on March 31, 1997).
10.6 1994 Director Stock Option Plan (incorporated by reference to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994 (File No. 0-21534) filed on March 31, 1995, as
amended by Form 10-KSB/A filed on October 4, 1995).
10.7 Attribution Agreement between the Company, Community Airwaves
Corporation, DCP Broadcasting Corporation and Christopher T. Dahl
dated February 15, 1995 (incorporated by reference to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994 (File No. 0-21534) filed on March 31, 1995, as
amended by Form 10-KSB/A filed on October 4, 1995).
10.8 Letter Agreement between the Company and Brenner Securities
Corporation dated November 7, 1995, relating to the provision of
certain financial services (incorporated by reference to the
Company's Registration Statement on Form S-2 (File No. 33-80721)
filed on December 21, 1995).
<PAGE>
10.9 Stock Purchase Agreement between the Company and John Quinn, dated
January 19, 1996 (incorporated by reference to the Company's
Registration Statement on Form S-2 (File No. 33- 80721) filed on
December 21, 1995).
10.10 Asset Purchase Agreement between the Company and Wolpin
Broadcasting Company, dated January 30, 1996 (incorporated by
reference to the Company's Registration Statement on Form S-2
(File No. 33-80721) filed on December 21, 1995).
10.11 Real Estate Purchase Agreement between Company and Weber/Wolpin
Realty Company, dated January 30, 1996 (incorporated by reference
to the Company's Registration Statement on Form S-2 (File No.
33-80721) filed on December 21, 1995).
10.12 Loan and Security Agreement between the Company and Foothill
Capital Corporation, dated November 25, 1996 (incorporated by
reference to the Company's Current Report on Form 8-K (File No.
0-21534) filed on December 20, 1996, relating to the Company
closing on a $16,500,000 loan from Foothill Capital Corporation).
10.13 Common Stock Purchase Warrant issued by the Company to Foothill
Capital Corporation, dated November 7, 1996 (incorporated by
reference to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996 (File No. 0-21534) filed on
March 31, 1997).
10.14 Asset Purchase Agreement between the Company and Lloyd B. Roach re
WPWA(AM), Chester, Pennsylvania, dated June 18, 1996 (incorporated
by reference to the Company's Registration Statement on Form S-3
(File No. 333-14483) filed on October 18, 1996).
10.15 Asset Purchase Agreement between the Company and Nelson
Broadcasting, Inc. re WAUR(AM), Sandwich, Illinois, dated
September 11, 1996 (incorporated by reference to the Company's
Registration Statement on Form S-3 (File No. 333-14483) filed on
October 18, 1996).
10.16 Asset Purchase Agreement between the Company and Bonneville
International Corporation re KIDR(AM), Phoenix, Arizona, dated May
20, 1997 (incorporated by reference to the Company's Registration
Statement on Form S-3 (File No. 333-28315) filed on June 3, 1997).
10.17 Promissory Note issued by the Company to Pyramid Partners, L.P. on
July 22, 1997 (incorporated by reference to the Company's Current
Report on Form 8-K (File No. 0-21534) filed on August 1, 1997,
relating to the Company acquiring a 27.4% beneficial interest in
Harmony Holdings, Inc.).
10.18 Promissory Note issued by the Company to Rodney P. Burwell on July
22, 1997 (incorporated by reference to the Company's Current
Report on Form 8-K (File No. 0-21534) filed on August 1, 1997,
relating to the Company acquiring a 27.4% beneficial interest in
Harmony Holdings, Inc.).
10.19 Promissory Note issued by the Company to William M. Toles on July
22, 1997 (incorporated by reference to the Company's Current
Report on Form 8-K (File No. 0-21534) filed on August 1, 1997,
relating to the Company acquiring a 27.4% beneficial interest in
Harmony Holdings, Inc.).
10.20 Registration Rights Agreement by and among the Company and Harmony
Holdings, Inc., dated July 22, 1997 (incorporated by reference to
the Company's Current Report on Form 8-K (File No. 0-21534) filed
on August 1, 1997, relating to the Company acquiring a 27.4%
beneficial interest in Harmony Holdings, Inc.).
10.21 Amended and Restated Loan and Security Agreement by and between
the Company and Foothill Capital Corporation, dated as of July 1,
1997 (incorporated by reference to the Company's Current Report on
Form 8-K (File No. 0-21534) filed on August 1, 1997, relating to
the Company acquiring a 27.4% beneficial interest in Harmony
Holdings, Inc.).
10.22 Put/Call Agreement between the Company and Glenn B. Laken, dated
September 25, 1997 (incorporated by reference to the Company's
Current Report on Form 8-K/A (File No. 0-21534) filed on October
1, 1997, relating to the Company acquiring a 40.7% beneficial
interest in Harmony Holdings, Inc.).
10.23 Letter Agreement between the Company and Foothill Capital
Corporation, dated September 25, 1997 (incorporated by reference
to the Company's Current Report on Form 8-K/A (File No. 0-
<PAGE>
21534) filed on October 1, 1997, relating to the Company acquiring
a 40.7% beneficial interest in Harmony Holdings, Inc.).
10.24 Amendment No. 1 to the Amended and Restated Loan and Security
Agreement by and between the Company and Foothill Capital
Corporation, dated as of September 24, 1997 (incorporated by
reference to the Company's Current Report on Form 8-K/A (File No.
0-21534) filed on October 1, 1997, relating to the Company
acquiring a 40.7% beneficial interest in Harmony Holdings, Inc.).
10.25 Common Stock Purchase Warrant issued by the Company to Foothill
Capital Corporation, dated September 25, 1997 (incorporated by
reference to the Company's Current Report on Form 8-K/A (File No.
0-21534) filed on October 1, 1997, relating to the Company
acquiring a 40.7% beneficial interest in Harmony Holdings, Inc.).
10.26 Amendment No. 2 to the Amended and Restated Loan and Security
Agreement by and between the Company and Foothill Capital
Corporation, dated as of March 13, 1998.*
10.27 Common Stock Purchase Warrant issued by the Company to Foothill
Capital Corporation, dated as of March 13, 1998.*
10.28 Promissory Note issued by the Company to Harmony Holdings, Inc.,
dated January 7, 1998.*
10.29 Amended and Restated Common Stock Purchase Warrant issued by the
Company to Foothill Capital Corporation, dated March 13, 1998.*
16.1 Letter on Change in Certifying Accountant (incorporated by
reference to the Company's Current Report on Form 8-K (File No.
0-21534) filed on July 3, 1996, relating to changes in the
Company's certifying accountant).
21.1 Subsidiaries of the Company.*
23.1 Consent of BDO Seidman, LLP.*
27.1 Financial Data Schedule.*
----------------------------
* Previously filed.
(b) Reports on Form 8-K
(1) The Company's Current Report on Form 8-K filed on November 3,
1997, relating to the Company's announcement that it has notified
its affiliate radio stations that it will terminate its network
affiliation agreements and cease distributing its full-time Aahs
World Radiosm programming format effective January 30, 1998.
(2) The Company's Current Report on Form 8-K/A filed on October 1,
1997, relating to the Company acquiring a 40.7% beneficial
interest in Harmony Holdings, Inc.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Minneapolis, State of Minnesota on
June 29, 1998.
CHILDREN'S BROADCASTING CORPORATION
By /s/ Christopher T. Dahl
-----------------------------------------
Christopher T. Dahl
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Christopher T. Dahl President, Chief Executive Officer and June 29, 1998
- ------------------------------ Chairman of the Board (Principal Eexecutive
Christopher T. Dahl Officer)
/s/ Patrick D. Grinde Chief Financial Officer June 29, 1998
- ------------------------------ (Principal Accounting and Financial Officer)
Patrick D. Grinde
/s/ Richard W. Perkins Director June 29, 1998
- ------------------------------
Richard W. Perkins
/s/ Michael R. Wigley Director June 29, 1998
- ------------------------------
Michael R. Wigley
/s/ William E. Cameron Director June 29, 1998
- ------------------------------
William E. Cameron
</TABLE>
