Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(D)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
September 30, 1996 0-26808
HUNGARIAN BROADCASTING CORP.
(Exact name of Registrant as specified in its charter)
Delaware 13-3787223
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
445 Park Avenue, New York, NY 10022
(Address of principal executive offices)
(212) 758-9870
The Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 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___
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest possible
date:
Common Stock, $.001 par value 2,585,600 Shares
(Class) (Outstanding at
September 30, 1996)
<PAGE>
HUNGARIAN BROADCASTING CORP.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Consolidated balance sheets as of September 30, 1996
(unaudited) and June 30, 1996 F-2
Consolidated statements of operations (unaudited)
for the three month ended September 30, 1996
and September 30, 1995 F-3
Consolidated statements of stockholders' equity
(unaudited) for the three months ended
September 30, 1996 and the three months
ended September 30, 1995. F-4
Consolidated statements of cash flows (unaudited)
for the three months ended September 30, 1996
and the three months ended September 30, 1995. F-5
Notes to consolidated financial Statements
(unaudited) F-6
Item 2. Management's Discussion and Analysis of F-11
Financial Condition and Results of Operations
Part II. Other Information
Signature
<PAGE>
HUNGARIAN BROADCASTING CORP.
CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 1996 AND JUNE 30, 1996
(expressed in US$)
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
(Unaudited)
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents 569,867 1,462,379
Accounts receivable, net of
allowance for doubtful accounts
of $89,057 (June 30, 1996 $82,536) 409,075 191,715
VAT receivable 82,842 123,175
Deferred program costs, less
accumulated amortization of 250,000 500,000
Prepaid expenses and other
current assets 75,907 42,383
----------- ----------
Total Current Assets 1,387,691 2,319,652
Investments 632 653
Broadcasting, office and
transportation equipment, less
accumulated depreciation of $21,247
(June 30, 1996; $14,067) 346,808 136,296
Broadcast license costs, less
accumulated amortization of
$564,163 (June 30, 1996; $458,405) 1,586,351 1,692,109
Other deferred financing and other
expenses, less accumulated
amortization of $118,754 (June 30,1996;
$98,460) 65,396 103,341
----------- ------------
Total Assets $3,386,878 $ 4,252,051
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of notes payable 996,559 975,412
Accounts payable 438,018 479,047
Accrued expenses 199,765 129,271
Due to related parties 404,784 454,720
Other 29,447 231,307
----------- -----------
Total Current Liabilities 2,068,573 2,269,757
----------- -----------
Minority Interest 34,462 40,326
----------- ----------
Total Liabilities and
Minority Interest 2,103,035 2,310,083
------------- ----------
Commitments and Contingencies (Notes 8 and 9)
Stockholders' Equity
Preferred Stock, $.001 par value -
shares authorized 5,000,000 (June
30, 1996:5,000,000); issued and
outstanding 100,000 (June 30, 1996;0) 100 -
Common stock, $.001 par value -
shares authorized 15,000,000 (June 30,
1996:15,000,000);issued and outstanding
2,585,600 2,585 2,583
Additional paid-in capital 7,154,950 6,789,029
Accumulated deficit (6,076,567) (4,980,040)
Cumulative translation adjustment 202,775 130,396
----------- ----------
Total Stockholders' Equity 1,283,843 1,941,968
----------- ----------
3,386,878 4,252,051
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HUNGARIAN BROADCASTING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Expressed in US$, except share amounts)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, 1996 September 30, 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Revenues 353,315 207,837
Expenses
Operating costs and expenses 611,355 420,596
Amortization of broadcast
license costs 105,763 96,292
Amortization of deferred program
costs 250,000 -
Selling, general and administrative
expenses 353,848 414,993
----------- ----------
1,320,966 931,881
----------- ----------
Operating loss ( 967,651) (724,044)
Interest and other income 25,951 8,766
Interest expense (65,453) (131,152)
Exchange rate loss (95,240) -
---------- ---------
Net loss (1,102,393) (846,430)
Minority interest 5,864 -
Net loss after minority interest $(1,096,529) $(846,430)
Net loss per share $ (0.42) $ (0.59)
Weighted average number of
common shares outstanding 2,583,933 1,427,500
</TABLE>
See accompanying notes to consolidated financial statements.
F - 3
<PAGE>
HUNGARIAN BROADCASTING CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Unaudited)
(expressed in US$, except share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED Common Stock Preferred Stock Cumulative
SEPTEMBER 30, 1996 ------------ ---------------- Additional Accumulated Translation
Shares Amount Shares Amount Paid-in Capital Deficit Adjustment
------ ------ ------ ------ ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance June 30, 1996 2,583,600 2,583 - - 6,789,029 (4,980,040) 130,396
Issuance of preferred
stock 100,000 100 354,400
Issuance of common stock-
August 1996 1,000 1 4,999
Issuance of common stock-
September 1996 1,000 1 4,999
Net loss for period (1,096,529)
Foreign currency translation 82,509
adjustment
----------------- -------------- ----------- ------------ ---------
Balance, September 30, 1996 2,585,600 2,585 100,000 100 7,153,427 (6,076,569) 212,905
THREE MONTHS ENDED
SEPTEMBER 30, 1995
Balance June 30, 1995 1,265,000 1,265 - - 862,545 ( 830,358) 10,130
Issuance of common stock-
July 1995 182,500 182 499,818 - -
Issuance of common stock-
August 1995 200,000 200 549,612 - -
Net loss ( 846,430)
------------------- ---------------- ----------- ------------- ---------
Balance, September 30, 1995 1,647,500 $1,647 - - $1,911,975 $ (1,676,788) $ 31,510
</TABLE>
See accompanying notes to consolidated financial statements.
F - 4
<PAGE>
HUNGARIAN BROADCASTING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1996 AND THE THREE MONTHS
ENDED SEPTEMBER 30, 1995
(Unaudited)
(expressed in US$)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995
------------------ -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss (1,096,529) (846,430)
Adjustments to reconcile ----------- ----------
net loss to net cash used
in operating activities:
Amortization of deferred
financing costs and
organization 20,294 91,560
Amortization of program costs 250,000 -
Amortization of broadcast
license costs 105,763 96,292
Depreciation of fixed assets 7,180 7,747
Currency translation adjustment 95,240 -
Changes in operating assets
and liabilities
(Increase) in accounts
receivable (217,360) (775)
(Increase)/Decrease in VAT
receivable 40,333 (61,100)
(Increase) in prepaid expenses
and other assets (33,524) (12,024)
(Decrease) in accounts payable (41,029) (171,330)
Increase in accrued expenses 70,494 16,373
Increase/(Decrease) in
other liabilities (201,860) 11,427
---------- ---------
Net cash used in operating
activities (1,000,998) (868,260)
----------- ---------
Cash Flows From Investment Activities
Purchase of broadcasting, office,
and transportation equipment (218,692) -
----------- ----------
Net cash used in investment
activities (218,692) -
----------- ----------
Cash Flows From Financing Activities:
(Decrease)/Increase in advances
from related parties (49,936) 53,360
Proceeds from issuance
of common stock 10,000 949,812
Proceeds from issuance of
preferred stock 450,000
Payments for offering costs (95,500) (99,446)
----------- ---------
Net cash provided by financing
activities 314,564 903,726
Effect of translation adjustment
on cash 12,614 12,788
Increase/(Decrease) in Cash and
Cash Equivalents (892,512) 53,254
Cash and cash equivalents at
beginning of period 1,462,379 295,006
Cash and cash equivalents at
end of period 569,867 348,260
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F - 5
<PAGE>
HUNGARIAN BROADCASTING CORP.
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Business
Hungarian Broadcasting Corp. (the "Company") which was
incorporated in the State of Delaware on September 14, 1994,
was organized to acquire interests in companies that have
commercial broadcasting licenses to own, develop, expand and
operate television stations in Hungary. The Company operates
in Hungary through a wholly-owned subsidiary known as HBC
(Hungary) Kft. ("HBC") which was organized in November 1994.
The Company acquired a 90% interest in VI-DOK Video es
Filmgyarto studio Kft. ("VI-DOK") as of June 16, 1995, and an
80% interest in DNTV Kft. (DNTV) as of May 30, 1995, two
Hungarian companies (the "Licensees") which had been granted
television licenses by the Hungarian Cultural Ministry in
April 1994 to broadcast Channel AM-micro A3 ("A3") from July
1, 1994 through July 1, 2000, daily between 6 a.m. and 5
p.m. and between 7.30 p.m. and 6 a.m. with a maximum
advertising time of 20%. Broadcasting on A3 (subsequently
renamed MSAT) commenced in September 1994. The 90% interest
in VI-DOK was acquired for $240,000 and the 80% interest in
DNTV for $176,000. In September 1996 the Company began
broadcasting throughout Hungary and renamed its station
"MSAT".
From the date of inception through September 30, 1995, the
Company's consolidated financial statements reflected
nominal revenues and the Company was considered to be in the
development stage. In management's opinion, the Company
emerged from the development stage during the three months
ended December 31, 1995.
The operations of the Company are essentially in Hungary
where the majority of revenues and expenditures are
incurred. With the exception of cash and cash equivalents
amounting to $549,539 and notes payable of $996,559, the
assets and liabilities of the company relate to Hungary.
2. Interim Financial Information
The accompanying consolidated financial statements for the
three months ended September 30, 1996, and the three months
ended September 30, 1995 are unaudited but, in the opinion
of management, include all adjustments, consisting mainly of
normal recurring accruals necessary for the fair
presentation. Results for the interim periods are not
necessarily indicative of the results for a full year.
3. Incorporation by Reference
Reference is made to the Company's consolidated
financial statements, and the notes thereto, which
were included in Form 10-KSB filed with the U.S. Securities
and Exchange Commission in September 1996, and which are
incorporated herein by reference.
<PAGE>
HUNGARIAN BROADCASTING CORP.
Notes to Consolidated Financial Statements
(Unaudited)
4. Notes Payable
From November 1994 through March 1995, the Company sold (in
a private placement) units consisting of $2,120,000
aggregate principal amount of unsecured promissory notes and
265,000 shares of common stock for an aggregate purchase
price of $2,120,000. The Company incurred $153,789 of
financing expenses relating to the private placement, of
which $122,100 and $31,689 has been allocated to debt and
equity, respectively. The $153,789 includes legal fees of
$28,200 paid to the Company's secretary/director. The notes
bear interest at 6% per annum and were originally due upon
the earlier of December 31, 1996 or the successful
consummation of the IPO, which was rescinded during November
1995 (See Note 9: "Legal Proceedings"). The revised terms
required that only one-half of the notes were due upon the
earlier of December 31, 1995 or the successful consummation
of the subsequent IPO. The balance of the notes are due on
June 30, 1997. Consequently, the amortization expense
relating to the original issue discount and deferred
financing expenses were recomputed over the revised expected
term of the notes. Total original issue discount of
$437,000 (an imputed interest rate of 19% per annum) has
been recorded and is being amortized over the expected term
of the notes, along with the $122,100 of financing expenses
related to the debt portion of the private placement. The
remaining unamortized original issue discount and deferred
financing expenses totaled $63,441 and $17,730,
respectively, as of September 30, 1996. During January
1996, $1,060,000 of the notes were repaid. Should the
remaining notes be repaid before June 30, 1997, any
unamortized portion of the original issue discount and
deferred financing expenses will be charged to operations at
the time of repayment.
Notes payable of $996,559 at September 30, 1996 consist of
the remaining notes due of $1,060,000, less the unamortized
portion of the original issue discount of $63,441.
The private placement investors have the right to include
their shares in any registration statement filed by the
Company to the extent that the managing underwriter of the
public offering advises the Company that such inclusion
would not interfere with the ordinary sale of the
securities to be publicly offered.
5. Common Stock
(a) In July 1995, the company sold 182,500 shares of
common stock at a price of $3 per share for an aggregate of
$547,500 ($500,000 net) of which 30,000 shares were sold to
a director/officer of the Company. In August 1995, the
Company sold 200,000 shares of common stock at a price of $3
per share for an aggregate of $600,000 (approximately
$550,000 net). $100,000 representing the remaining stock
subscription receivable at September 30, 1995, was received
on October 4, 1995. On December 6, 1995, three of the
Company's officers, Messrs. Klenner, Genova, and Cohen,
contributed to the Company for cancellation 100,000,
100,000 and 20,000 common shares, respectively, for no
consideration.
(b) The Company made a public offering of 1,000,000
shares of common stock at $7 per share in November 1995.
The offering was rescinded after the shares offered traded
below $7 per share between the effective date and the
scheduled closing date of the offering. The company
incurred $129,631 of expenses in connection with that
offering, which were shown as deferred offering costs in the
financial statements at September 30, 1995 and were charged
to operations during the quarter ended December 31, 1995.
<PAGE>
HUNGARIAN BROADCASTING CORP.
Notes to Consolidated Financial Statements
(Unaudited)
(c) On December 20, 1995 the Company completed an IPO
of 1,150,000 shares of its common stock at $5 per share and
1,610,000 redeemable common stock purchase warrants at $.15
per warrant. Each warrant entitles the holder to
purchase one share of common stock at an exercise price of
$6.00 per share during the five-year period ending December
20, 2000. The warrants will be redeemable beginning April
20, 1997. The Company also issued to the underwriter
warrants for the purchase of 100,000 shares of common stock
at $8.25 per share and 140,000 common stock purchase
warrants at $0.225 per warrant. The proceeds of this
offering amounted to approximately $4,995,338 net of
underwriting commissions and expenses.
(d) On June 21, 1996, the Company increased the number
of authorized shares of Common Stock from 5,000,000 to
15,000,000; authorized the issuance of up to 5,000,000
shares of Preferred Stock; and increased the number of
shares of Common Stock available under the Company's 1994
Incentive Stock Option Plan, as amended, from 100,000 shares
to 350,000 shares for use as incentive awards to certain key
employees, directors and consultants.
(e) As of August 1996 the Company hired a consultant (
a director of the Company) for a two year period at a fee
of 1,000 shares of non-registered Common Stock per month.
The Company has determined the value of these securities to
be $5 per share.
6. Units; Preferred Stock
In September 1996 the Company sold in a private placement
100,000 Units at a price of $4.50 per Unit. Each unit
consists of one preferred share (convertible into one and
one-half shares of Common Stock) and one Common Stock
Purchase Warrants with the same terms as the warrants issued
with the Initial Public Offering. Proceeds to the company
after expenses were $354,500.
7. Related Party Transactions
On June 30, 1995, the minority stockholders were owed
$416,000, as a result of the Company's purchase of their
stock. On February 5, 1996, $189,800 was paid, leaving a
balance due of $226,200 at September 30, 1996. The amount
due to related parties at September 30, 1996 also includes
$145,000 due to an officer/director.
8. Commitments
(a) Consulting and Compensation Agreements
The Company has a five-year employment agreement ending
December 31, 2000 with its President and Chief Executive
Officer at a monthly salary of $10,000. He is also entitled
to reimbursement for ordinary and necessary business
expenses.
<PAGE>
HUNGARIAN BROADCASTING CORP.
Notes to Consolidated Financial Statements
(Unaudited)
The Company has a two-year employment agreement ending
December 31, 1997 with its Executive Vice President at a
monthly salary of $10,000. He is also entitled to
reimbursement for ordinary and necessary business expenses.
The Company's Secretary is a partner in a firm which
has a two-year retainer agreement ending December 31, 1997
to provide all SEC related legal services for the
Company, except for services in connection with private
placements or public offerings, for a fee of $100,000 per
year, beginning in 1996.
A financial and management consultant receives a fee of
$3,000 per month for a two-year term ending December 31,
1997. Another consultant (a director of the Company)
receives 1000 shares of common stock as a monthly fee
ending July 31, 1998.
As compensation to outside directors, the Company pays
directors' fees equal to $2,000 per meeting, minimum of four
meetings per year, and reimburses their travel and other
out-of-pocket expenses. Officers do not receive any
compensation for serving as directors.
(b) Leases
The Company has a five year lease for broadcasting and
office facilities in Budapest, Hungary, with minimum monthly
payments before value added taxes of $12,000, ending June
30, 2001.
9. Legal Proceedings
Prior to November 20, 1995, the Company filed a Registration
Statement with the Securities and Exchange Commission on
Form SB-2 for an Initial Public Offering of 1,000,000 of
its shares of Common Stock at $ 7 per share, which
Registration Statement became effective on November 17,
1995. On November 20, 1995, the Company entered into a firm
commitment underwriting agreement with Coleman and Company
Inc. ("Coleman") for the sale of 1,000,000 of its shares at
$7 per share. Starr Securities Inc. ("Starr") was named
as a co-underwriter in the Registration Statement with
closing scheduled for November 27, 1995. At the Closing,
Coleman advised the Company that it did not have the funds
to close, that it was unilaterally rescinding the contract;
and that it would request NASDAQ to cancel all trades made
since November 20, 1995.
On January 3, 1996, the Company commenced an action
against Coleman and Starr in the United States District
Court, Southern District of New York for breach of contract
demanding judgment of the full contract price of the public
offering together with such other compensatory and
consequential damages in amounts to be determined at trial.
On January 19, 1996, Starr commenced an action in the
Supreme Court of New York against the Company and its former
Chairman of the Board, Robert Genova, for libel and
defamation of Starr's character, and for threatening to
continue to defame Starr's character by stating that Starr
"walked away" from the Initial Public Offering and breached
its contract with the Company unless
<PAGE>
HUNGARIAN BROADCASTING CORP.
Notes to Consolidated Financial Statements
(Unaudited)
Starr made a bridge loan to or private placement for
the Company. The complaint further alleged that when Starr
did not accede to the Company's demands, the Company
continued to vilify Starr in the financial community by
stating that Starr walked away from the Initial Public
Offering and breached its contract with the Company and by
commencing an action in the U.S. District Court, Southern
District of New York on January 3, 1996, falsely accused
Starr of breach of contract. Starr further included a cause
of action on the same facts for prima facie tort. The
Company had this action removed to the U.S. District Court,
Southern District of New York. Starr moved to remand both
actions to the New York Supreme Court on the ground of lack
of diversity of citizenship, which motion was granted. The
Company then recommenced its action in the New York Supreme
Court and consolidated its action with the Starr proceeding.
The Company believes its action has merit and that it has
valid defenses to the action brought by Starr.
Management believes that the outcome of the above litigation
will not have a material adverse effect on the financial
position, liquidity or results of operations of the Company.
10. Subsequent Events
The Company has filed a draft registration statement in
anticipation of a public offering of securities over the
next few weeks.
An officer/director has advanced $200,000 of short-term
financing to the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company was organized in September 1994 and in
October it commenced exploring opportunities to own, operate
and develop a regional private commercial television station
in Hungary. In November 1994, it obtained a six month
option to acquire majority interests in DNTV and VI-DOK, two
Hungarian corporations (the "Licensees") that were granted
licenses in March 1994 for a six year term commencing July
1, 1994 to operate Channel A3. The Licensees commenced
their broadcasting on A3 on a limited basis in September
1994 and increased their broadcasting to 21.5 hours per day
in December 1994. During the option period, the company
loaned approximately $2,000,000 to the Licensees, which was
used by the Licensees principally for broadcasting expenses
and to produce and purchase programming.
During the option period, the Company incurred
significant costs in preparing business plans and developing
an advertising sales staff, a station management team and a
program format.
In May and June 1995, the Company acquired majority
interest in the two Licensee Companies by purchasing 80% of
DNTV and 90% of VI-DOK and assumed operational control of
the two companies.
The Company's revenues are derived principally from the
sale of television advertising to national, international
and local advertisers. Although the Company's television
broadcasting activities have begun only recently, the
experience of the television industry is that advertising
sales tend to be lowest during the third quarter of each
calendar year, which includes the summer holiday schedule
(typically July and August) and highest during the fourth
quarter of each calendar year.
<PAGE>
The primary expenses incurred in operating television
stations are employee salaries, programming costs,
broadcast and transmission expenses and selling, general
administrative expenses.
In Management's opinion, the Company emerged from the
development stage as of December 31, 1995.
For the three months ended September 30, 1996, the
Company had consolidated revenues of $353,315 (primarily
from the sale of advertising time) and incurred a net loss
for the quarter of $1,096,529. Operating expenses were
$1,320,966, including amortization of broadcast license cost
$105,763.
A3 broadcast only video music clips prior to June 1995
when the Company assumed control. After changing to a civic
events format in June 1995, the Company returned to the
video music clips format in October 1995 which was less
expensive to produce.
On December 28, 1995 the Company received the proceeds
from the sale of shares and warrants in its Initial Public
Offering and determined to relaunch Channel A3 as a Western
Style station. In April 1996, the Company introduced new
programming for the hours 7:30 p.m. to 11:00 p.m. featuring
American, United Kingdom and Australian syndicated series
that had been successful in prime time in their home
countries. The Company dubbed these programs into the
Hungarian language. Generally, the audience acceptance of
these programs has been favorable and viewership has been
high and has increased over time.
On September 6, 1996, A3 began transmitting its signal
from the Astra IE Satellite. Over the next year it is
anticipated that Hungarian Broadcasting Corp. will increase
its distribution up to approximately 1.8 million households
throughout Hungary. In October 1996 the Company changed its
broadcasting name to MSAT to reflect the enhanced
distribution of its programs. Advertising billing is
determined by program ratings provided by AGB, an independent
audience rating service. As the Company`s distribution more
than doubles, its advertising rates should more than double,
and as the coverage broadens, the station is of increasing
interest to national and international advertisers. As a
result of conversations with advertisers and media buying
groups together with booked advertising and the improving
trend of bookings, Management believes that it should begin
generating positive cash flow on a monthly basis prior to
the end of fiscal 1997.
Nevertheless, since its inception, the Company has run
at a deficit in each month of its operations and should
continue to run deficits for the next few months. There can
be no assurance that the Company can generate enough
revenues to cover its expenses in fiscal 1998, or ever.
Liquidity and Capital Resources
From its inception through December 1, 1995, the
Company sold 1,647,500 shares of Common Stock in a series of
private transactions for proceeds of $1,913,622 net of
issuance costs and, in addition, issued promissory notes in
the aggregate amount of $ 2,120,000. On December
6, 1995; 220,000 shares owned by three officer of the
Registrant were contributed to the Company for no
consideration.
On December 20,1995, the Company completed an Initial
Public Offering of 1,150,000 shares of its common stock at $
5 per share and 1,610,000 redeemable common stock purchase
warrants at $.15 per warrant. Each warrant entitles the
holder to purchase one share of common stock at an exercise
price of $ 6.00 per share through December 20, 2000. The
warrants will be redeemable, commencing April 20,1997. The
Company also issued to the underwriter warrants for the
purchase of 100,000 shares of common stock at $8.25 per
share and 140,000 common stock purchase warrants at $0.225
per warrant. The proceeds of this Offering amounted to
<PAGE>
approximately $ 4,841,000 net of underwriting commission and
expenses. In September 1996 the Company sold 100,000 Units
in a private placement that provided net proceeds of
$354,500. Each Unit consisted of one share of preferred
stock (convertible into one and one-half shares of Common
Stock) and one Common Stock Purchase Warrant with the same
terms as warrants issued with the IPO.
The Company believes that its existing cash balance,
cash from future operations and the net proceeds from a
planned securities offering will be sufficient to fund the
Company's operations at least until December 31, 1997
including satellite costs, repayment of the remaining Bridge
Notes of $996,559 plus interest and prepay expenses
incurred for the purchase and dubbing of programming.
Foreign Currency
The Company's broadcasting operations in Hungary incur
both general revenues and operating expenses in Hungarian
forints. Assets and liability accounts are translated into
U.S. dollars at period-end exchange rate; income and expense
accounts are translated at the average exchange rate for the
period. The resulting adjustments are reflected in a
component of stockholders' equity. Currency translation
adjustments relating to transactions of the Company and its
subsidiaries in currencies other than the functional
currency of the entity involved are reflected in the
operating results of the Company.
Since virtually all revenues and expenses are in local
currency, the Company does not hedge against foreign
currency exchange risks.
Item 1. Legal Proceedings
See "Legal Proceedings" in Notes to Consolidated
Financial Statements.
Item 2. Changes in Securities
During the three months ended September 30, 1996 the
Company sold 100,000 Units priced at $4.50 per Unit in a
private placement. Each Unit consisted of one share of
preferred stock (convertible into one and one-half shares of
Common Stock) and one Common Stock Purchase Warrant with
the same terms as the warrants sold in the initial public
offering. In addition, during the quarter ended September
30, 1996, the Company issued 2,000 common shares to a
director in payment of consulting fees.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security
Holders
None
Item 5. Other Information
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits (numbers below are references to
Regulations S-B)
(3) (a) Certificate of Incorporation filed
September 14, 1994*
(b) Certificate of Amendment to Certificate
of Incorporation filed by
June 28, 1996(((
(c) By-laws*
(4) (a) Form of Warrant Agreement**
(a)(i) Form of Common Stock Purchase
Warrant Certificate**
(b) Form of Underwriter's Warrant**
(c) Form of Underwriter's Stock Warrant**
(10) (a) Employment Agreement with Peter E.
Klenner*
(b) Employment Agreement with Imre M.
Kovats*
(c) Financial Consultant Agreement with
Robert Genova*
(d) 1994 Incentive Stock Plan*
(e) Sharing agreement for space and
facilities between Registrant and
Hungarian Telephone and Cable Corp.*
(f) Agreement to purchase shares in DNTV*
(g) Agreement to purchase shares in VI-DOK*
(h) Letter of intent with Kablecom*
(I) Offer from OKK Kft. to Registrant to
rent satellite space to Company*
(j) Agreement with Land Studios Kft*
(k) Lease agreement with Hakon Ltd. for
space at Szamado, Budapest*
(l) Form of 6% Bridge Note*
(m) License to broadcast on A3*
(n) Form of Consulting Agreement with J.W.
Barclay & Co., Inc.**
(o) Form of Mergers and Acquisitions
Agreement with J.W. Barclay
& Co., Inc.**
(p) Purchase of programming agreement with
Power TV Ltd, February 28
and July 29, 1996***
(q) Satellite space agreement with Nethold
Central Europe BV***
(r) Management and consulting agreement with
Justin Bodle dated June 15, 1996.***
(s) Uplink and downlink agreement with
Banknet, June 26, 1996
(t) Lease agreement with Investor Holding Rt
dated June 25, 1996.***
(21) Subsidiaries of the Registrant*
______________
* Filed with Registration Statement No. 33-96674
** Filed with Registration Statement No. 33-80177
*** Filed with Form 10-KSB dated June 30, 1996
B. The following reports on Form 8-K have been filed
during the three months ended September 30, 1996:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of
New York, State of New York, on the 21st day of November, 1996.
HUNGARIAN BROADCASTING CORP.
By /s/ Frank R. Cohen
----------------------------
Frank R. Cohen
Treasurer and Secretary
