-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R1LZNSBDt7Qk2Y3a6KU9ePxSmh6vJR3JSAsCr1CRBR6MQVhKvcQ7k9J0/Ze6oG2w tZF2G+I+L3xvrETatCv+Jw== 0000897101-98-000648.txt : 19980608 0000897101-98-000648.hdr.sgml : 19980608 ACCESSION NUMBER: 0000897101-98-000648 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980605 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHILDRENS BROADCASTING CORP CENTRAL INDEX KEY: 0000882160 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 411663712 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-21534 FILM NUMBER: 98643208 BUSINESS ADDRESS: STREET 1: 724 1ST ST N STREET 2: 4TH FLOOR CITY: MINNEAPOLIS STATE: MN ZIP: 55401 BUSINESS PHONE: 6123383300 MAIL ADDRESS: STREET 1: 724 FIRST STREET NORTH STREET 2: FOURTH FLOOR CITY: MINNEAPOLIS STATE: MN ZIP: 55401 10KSB/A 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- 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. ================================================================================ 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 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 __ 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 __________ 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 __________ 1998. Mr. Grinde ____________________________________________. 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. 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. 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 $100,000 (the "Named Executive Officers") for services rendered to the Company and its subsidiaries during the fiscal years ended December 31, 1997, 1996 and 1995. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ---------------------- ANNUAL COMPENSATION (1) AWARDS ----------------------- ---------------------- NAME AND SECURITIES UNDERLYING PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS - --------------------------------- -------- ----------- --------- ---------------------- 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)
- --------------- (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. (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 $9.50 per share. The following table sets forth the number of securities underlying options granted in1997, the percent the grant represents of the total options granted to employees during such fiscal year, the per-share exercise price of the options granted, and the expiration date of the options for the Named Executive Officers. OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENT OF TOTAL SECURITIES OPTIONS GRANTED TO UNDERLYING OPTIONS EMPLOYEES IN FISCAL EXERCISE PRICE(1) NAME GRANTED (#) YEAR (%) ($/SHARE) EXPIRATION DATE - ------------------------------ ------------------ ------------------- ----------------- --------------- 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
- ----------------- (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
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 - ---------------------------------- ----------- -------- ----------------- -------------------- 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
- ----------------- (1) Market value of underlying securities at fiscal year end minus the exercise price. 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 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. 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. 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). 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- 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. 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 5, 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.
Signature Title Date - --------- ----- ---- /s/ Christopher T. Dahl President, Chief Executive Officer and June 5, 1998 - ------------------------------ Chairman of the Board (Principal Eexecutive Christopher T. Dahl Officer) /s/ Patrick D. Grinde Chief Financial Officer June 5, 1998 - ------------------------------ (Principal Accounting and Financial Officer) Patrick D. Grinde /s/ Richard W. Perkins Director June 5, 1998 - ------------------------------ Richard W. Perkins /s/ Michael R. Wigley Director June 5, 1998 - ------------------------------ Michael R. Wigley /s/ William E. Cameron Director June 5, 1998 - ------------------------------ William E. Cameron
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