-----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, CmvAmGjb23G/XVlyrMGovNDq2f9N7m1ZjKvqgHylBBsd6piUWffBbr0PlzykiWC0 ZYerGS8xdZ9jOrYwceSozA== 0000912057-96-023087.txt : 19961018 0000912057-96-023087.hdr.sgml : 19961018 ACCESSION NUMBER: 0000912057-96-023087 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19961017 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: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21534 FILM NUMBER: 96644654 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 10QSB/A 1 10QSB/A FORM 10-QSB/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarterly period ended June 30, 1996 or ------------- [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from _________ to _________ Commission File No. 0-21534 ------- Children's Broadcasting Corporation ---------------------------------------------------------- (Exact name of registrant as specified in its charter) Minnesota 41-1663712 ------------------------------- -------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 724 First Street North-4th Floor, Minneapolis, MN 55401 -------------------------------------------------------------- (Address of principal executive office zip code) (612) 338-3300 ---------------------------------------------------- Registrant's telephone number, including area code Former Address: - ---------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report 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 ------- ------- APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court Yes No ------- ------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 5,629,858 --------- INDEX CHILDREN'S BROADCASTING CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets -- June 30, 1996 and December 31, 1995. Consolidated Statements of Operations -- Three and six months ended June 30, 1996 and 1995. Consolidated Statements of Cash Flows -- Six months ended June 30, 1996 and 1995. Notes to consolidated financial statements -- June 30, 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K This Form 10-QSB/A for the quarter ended June 30, 1996 contains certain forward- looking statements as defined in the Private Securities Litigation of 1995, which may be identified by the use of such forward-looking terminology as "believes," "expects," "anticipates," "will," and "intends," or comparable terminology. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Potential purchasers of the Company's securities are cautioned not to place undue reliance on such forward looking statements which are qualified in their entirety by the cautions and risk factors contained in the Company's Form 8-K Report filed on July 8, 1996 (File NO. 0-21534). PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHILDREN'S BROADCASTING CORPORATION CONSOLIDATED BALANCE SHEET (UNAUDITED)
AMENDED JUNE 30 DECEMBER 31 1996 1995 ------------- ----------- ASSETS Current assets: Cash and Cash Equivalents $4,541,745 $587,292 Accounts Receivable 933,472 876,487 Allowance For Bad Debts (54,890) (71,490) Accounts Receivable-Other 108,334 49,576 Prepaid Expenses 92,343 707,689 Trade Activity, Net 155,748 23,435 Inventory 77,260 74,046 ------------- ----------- TOTAL CURRENT ASSETS 5,854,012 2,247,035 Deferred Expenses 7,261 2,288,141 Property & Equipment, Net 3,497,905 3,083,769 Broadcast License, Net 17,140,364 4,969,573 Intangible Assets, Net 1,136,792 738,220 ------------- ----------- TOTAL ASSETS $27,636,334 $13,326,738 ------------- ----------- ------------- ----------- LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $515,370 $749,742 Accrued Interest 49,420 301,389 Other Accrued Expenses 642,242 733,371 Short-Term Debt 1,268,192 3,650,000 Short-Term Debt -- Officers and Directors 0 900,000 Long-Term Debt - Current Portion 383,684 297,365 Obligation Under Capital Lease - Current Portion 11,276 36,173 ------------- ----------- TOTAL CURRENT LIABILITIES 2,870,184 6,668,040 Long-Term Debt - Net of Current Portions 1,747,164 872,338 Obligation Under Capital Lease 8,437 52,847 ------------- ----------- TOTAL LIABILITIES 4,625,785 7,593,225 Convertible Preferred Stock Autorized Shares - 290,213 Issued and Outstanding Shares - 290,213 redeemable at $10 Per Share on August 29, 1999 2,326,633 2,246,838 Shareholders' Equity: Common Stock, $.02 Par Value: Authorized shares - 12,500,000 Issued & outstanding shares - Voting: 5,440,817 1996 and 2,945,183-- 1995; Issued and Outstanding Shares - 189,041 nonvoting - 1996 and 1995 112,597 62,683 Additional Paid-In Capital 41,963,086 19,491,302 Accumulated Deficit (21,391,767) (16,067,310) ------------- ----------- TOTAL SHAREHOLDERS' EQUITY 20,683,916 3,486,675 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $27,636,334 $13,326,738 ------------- ----------- ------------- -----------
CHILDREN'S BROADCASTING CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Amended Amended Three Months Ended Six Months Ended June 30 June 30 ----------------------------- ---------------------------- 1996 1995 1996 1995 ------------- ------------- ------------- ------------- REVENUES: Owned, Operated and LMA Stations $1,082,178 $1,140,322 $1,940,658 $2,030,126 Network 249,289 263,950 606,832 635,976 ------------- ------------- ------------- ------------- REVENUES $1,331,467 $1,404,272 2,547,490 2,666,102 OPERATING EXPENSES: Owned, Operated and LMA Stations: General and Administrative 524,774 480,243 994,212 1,041,702 Technical and Programming 222,073 231,345 421,875 525,901 Selling 341,642 409,440 682,169 904,308 ------------- ------------- ------------- ------------- 1,088,489 1,121,028 2,098,256 2,471,911 Network: General and Administrative 222,156 127,724 448,140 258,074 Programming 212,997 150,119 431,127 282,069 Selling 215,279 255,323 428,070 583,224 Marketing 123,718 6,684 243,949 13,244 Magazine 62,396 38,567 125,541 57,558 ------------- ------------- ------------- ------------- 836,546 578,417 1,676,827 1,194,169 TOTAL BROADCASTING OPERATING EXPENSES 1,925,035 1,699,445 3,775,083 3,666,080 Corporate 364,712 213,565 656,889 427,964 Corporate Expenses Paid to Affiliated Management Company 150,000 150,000 300,000 300,000 Depreciation & Amortization 559,320 225,391 OP1,091,085 457,191 Loss on Exchange of Assets - 24,226 - 28,687 * Write Off of Deferred Warrant Expense 1,662,378 1,662,378 ------------- ------------- ------------- ------------- TOTAL OPERATING EXPENSES 4,661,445 2,312,627 7,485,435 4,879,922 ------------- ------------- ------------- ------------- LOSS FROM OPERATIONS (3,329,978) (908,355) (4,937,945) (2,213,820) Interest Income (132,955) (4,673) (170,191) (7,449) Interest Expense 171,766 169,801 476,908 305,490 ------------- ------------- ------------- ------------- NET LOSS ($3,368,789) ($1,073,483) ($5,244,662) ($2,511,861) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ($0.90) ($1.40) ($1.43) ($0.93) ------------- ------------- ------------- ------------- NET LOSS PER SHARE ------------- ------------- ------------- ------------- WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,736,000 2,710,000 3,736,000 2,710,000 ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
* This write off is the result of the July 1996 decision by ABC Radio Networks, Inc. to terminate its joint operating agreement with the Company, effective October 1996. CHILDREN'S BROADCASTING CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
AMENDED SIX MONTHS ENDED JUNE 30 -------------------- -------------------- 1996 1995 -------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss ($5,244,662) ($2,511,861) Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities: Depreciation & Amortization 1,091,085 457,191 Trade Activity (144,785) (58,996) Amortization and Write-Off of Deferred Warrant Expense 1,971,629 - Decrease (Increase) in: Accounts Receivable (73,585) (361,877) Other Receivables (58,758) 1,174 Prepaid Expenses 338,133 (88,127) Inventory (3,214) (287) Other Assets - - Increase (Decrease) in: Accounts Payable (234,372) 40,691 Accrued Interest (251,969) 192,376 Other Accrued Expenses (91,129) (88,482) -------------------- -------------------- NET CASH USED IN OPERATIONS (2,701,627) (2,418,198) -------------------- -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale of Property & Equipment - 770,589 Purchase of Property & Equipment (675,866) (160,167) Sale of Intangible Assets - - Purchase of Intangible Assets (8,538,434) (63,831) -------------------- -------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (9,214,300) 546,591 -------------------- -------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of Capital Lease Obligation (69,307) (10,904) Increase in Short Term Debt 900,000 2,125,000 Decrease in Short Term Debt (4,700,000) - Payment of Long Term Debt (111,139) (83,929) Proceeds from Long Term Debt - 69,350 Proceeds from Convertible Preferred Stock - 74,415 Proceeds from Issuance of Common Stock 19,850,826 5,001 -------------------- -------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 15,870,380 2,178,933 -------------------- -------------------- Increase in Cash 3,954,453 307,326 Cash - Beginning of Period 587,292 243,733 -------------------- -------------------- CASH - END OF PERIOD $4,541,745 $551,060 -------------------- -------------------- -------------------- -------------------- Supplemental Disclosure of Cash Flow Information: Cash Paid During the Period for Interest $500,046 $24,340 -------------------- -------------------- -------------------- --------------------
Supplemental Disclosure of Non-Cash Investing and Financing Activities: In conjunction with the purchase of WJDM in the New York market, the Company recognized intangible assets and incurred long term debt of $1,072,284 through a non-competition agreement. Additionally, assets aggregating $2,670,871 were purchased by issuing 270,468 shares of common stock, and assuming debt of $518,192 which was subsequently paid off in July 1996. CHILDREN'S BROADCASTING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 1996 NOTE 1--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 of Regulation SB. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals with the exception of the adjustments discussed in Note 2) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report or Form 10-KSB for the year ended December 31, 1995. NOTE 2--SIGNIFICANT TRANSACTIONS DURING 1996 The following significant transactions occurred during the first six months of 1996 and are considered non-recurring: A. In January 1996, the Company obtained financing of $750,000 from lenders, evidenced by notes bearing an interest rate of 6% per annum, payable July 8, 1996. The Company also granted warrants to the lenders to purchase 57,500 shares of common stock at $13.00 per share. Proceeds from this financing were used for the purchase of WJDM-AM in the New York market. The note was subsequently paid off in July 1996. B. The Company effected a one-for-two reverse stock split effective for shareholders of record January 23, 1996. Management believes this action will enhance acceptability and marketability of the Company's stock by the financial community and investing public. C. In March 1996, the Company completed a public offering for 2.2 million shares of common stock at $10 per share. Proceeds from the Offering were used to acquire radio stations in the New York and Detroit markets, to reduce debt and for working capital. D. With the proceeds obtained as a result of its public offering, the Company repaid $4,700,000 of principal on short term debt as well as approximately $408,000 of related interest. E. In June 1996, the Company purchased the assets of radio station WCAR-AM in Detroit, Michigan for $1.5 million cash. F. In June 1996, the Company purchased the stock of Radio Elizabeth, Inc. in order to obtain WJDM-AM in the New York market. The purchase price was $11,500,000, $2,500,000 of which was paid by the issuance of 270,468 shares of the Company's common stock. G. In July 1996, ABC Radio Networks, Inc. ("ABC") terminated its joint operating agreement with the Company. In connection with obtaining this agreement, the Company capitalized deferred expenses aggregating $2,221,000 related to the value of certain warrants issued to ABC. These costs were being amortized over the original 24 month term of the agreement. The July termination by ABC, combined with other related factors, are felt to support the belief that the working relationship between the Company and ABC was deteriorating and call into question the value associated with this agreement related to the remaining net unamortized deferred expenses. Accordingly, the remaining deferred expenses aggregating $1,662,378 at June 30, 1996, were written off as a second quarter expense. Total amortization and write-off of these deferred expenses aggregated approximately $1,972,000 for the quarter. In September 1996, the Company commenced an action against ABC related to the termination. No prediction of the outcome related to this action can be given at this time. H. The original quarterly financial statements have been amended to reflect the retroactive write-off of the $1,662,378 deferred expense as discussed in Note G above. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: THREE AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE AND SIX MONTHS ENDED JUNE 30, 1995. REVENUE: The Company's total revenues decreased 5% in the second quarter of 1996 to $1,331,000 compared to second quarter 1995 revenues of $1,404,000. For the first six months, total revenues of $2,547,000 were $119,000 or 4% lower than the same period in 1995. Trade/barter revenue decreased 40% during the first half of 1996 compared to the first half of 1995. Cash revenues derived from the owned, operated and LMA stations increased $176,000 from $1,432,000 during the first half of 1995 to $1,608,000 during the first half of 1996, an increase of 12%. The decrease in network revenues was due in part to the elimination of national advertising personnel and the transition of that function to ABC Radio Network, Inc. (ABC) as part of the joint operating agreement. Although the ABC agreement was canceled by ABC in July 1996, revenues for the network are expected to increase in the third and fourth quarters compared to the same periods in the prior year. These increases are expected due to booked advertising commitments from various advertisers which have already been secured by the Company without the assistance of ABC. OPERATING EXPENSES: Network Expenses: General and administrative expenses increased $94,000 in the second quarter of 1996 to $222,000 as compared to $128,000 for the same period of 1995. These expenses increased $190,000 or 74% for the first six months of 1996 compared to the same period in 1995. The primary reason for the increase was the monthly payment of $25,000 to ABC for services provided under the joint operating agreement. General and administrative expenses have grown as the scope of the network's activities has increased. Programming expenses increased $63,000 to $213,000 in the second quarter of 1996 compared to $150,000 in the second quarter of 1995. For the first six months, programming expenses increased 53% or $149,000 compared to the same period in 1995. This increase was due to the increase in programming salaries and the increase in remote live broadcasts which carry line charge, talent fee and rights fee expenses. Additionally, the network implemented an integrated telephone system to enhance programming and encourage active listener participation. Sales expenses in the second quarter of 1996 were $215,000 compared to $255,000 during the same period of 1995, a decrease of $40,000. Sales expenses decreased 27% to $428,000 in the first half of 1996 compared to $583,000 in the first half of 1995. These sales expenses relate to both advertising sales and affiliate relations sales. This decrease is due primarily to the reduction of advertising sales salaries as well as the reduction of travel and lodging expenses as a result of the Company utilizing the ABC advertising team under its joint operating agreement. Commissions, which are accounted for in the sales expense, vary with sales. Marketing expenses were $124,000 during the second quarter of 1996 compared to $7,000 in the second quarter of 1995. During the six months ended June 1996, marketing expenses increased $231,000 over the same period for 1995. The Company has begun to develop this department and anticipates expenses will remain at current levels as it becomes fully operational. Magazine expenses were $62,000 for the second quarter of 1996, and $126,000 for the six months ended June, 1996. These expenses are the result of the 1994 agreement the Company entered into with Time Warner to produce the national Radio AAHS monthly magazine. Time Warner has closed Warner Music Enterprises, the division responsible for producing the Radio AAHS magazine. Since production and distribution of the magazine have been interrupted, management expects these expenses to decrease until such time a new outlet is found for the production of the magazine. Owned, Operated and LMA Station Expenses: General and administrative expenses increased 9% to $525,000 for the second quarter of 1996 from $480,000 during the same period of 1995, due to the addition of the Detroit and New York stations in June 1995. Expenses decreased 5% in the six months ended June 30, 1996 to $994,000 from $1,042,000 in the six month period ended June 30, 1995, due to the reallocation of expenses which were included in the 1995 LMA fees incurred by the Denver station. This station was subsequently purchased by the Company in November 1995. Technical and programming expenses decreased $9,000 in the second quarter of 1996 from $231,000 in the second quarter of 1995 to $222,000. During the first half of 1996, these expenses decreased $104,000 or 20% compared to the same period in 1995. The technical expenses have decreased as equipment has been upgraded, thus requiring less maintenance and repair at this time. Sales expenses decreased from $409,000 in the second quarter of 1995 to $342,000 in the second quarter of 1996, a decrease of 17%. For the first six months of 1996, selling expenses of $682,000 were 25% lower than the same period in 1995. This change can be primarily attributed to the 61% reduction of trade/barter expenses during 1996 compared to the first half of 1995. Increases in cash expensed for the period are due primarily to the increase of billboard and print advertising used for clients as sales incentives. Commissions, which are accounted for in sales expense, vary with sales. Corporate charges were $515,000 in the second quarter of 1996 compared to $364,000 in the second quarter of 1995, representing an increase of 42%. Corporate charges increased 31% in the first six months of 1996 over the same period in 1995. This increase is attributable to an increase in outside service fees including investor relations and professional fees related to stock, trademark and employee matters. Depreciation and amortization increased to $250,000 in the second quarter of 1996 from $225,000 in the second quarter of 1995. For the first six months depreciation and amortization of $782,000 was $325,000 or 71% higher than the same period in 1995, due in part to the acquisition of the assets of its Denver station acquired in November 1995 and the value of the warrant to purchase the Company's common stock issued to ABC as part of a joint operations agreement. Interest expense for the quarter decreased $126,000 as a result of the repayment of debt from the proceeds of the public offering. Interest expense for the first half of 1996 increased 3% from $298,000 to $307,000. The net loss increased 213% in the second quarter of 1996 to $3,369,000 up $2,295,000 over the second quarter of 1995. For the first six months, net loss of $5,245,000 was $2,733,000 or 108% higher than the same period in 1995. A significant portion of the increased loss is due to the write off of the deferred warrant expense associated with the ABC Radio Networks joint operating agreement. This write-off, which totaled $1,662,378, became necessary pursuant to the July 1996 decision by ABC to terminate this agreement, effective October 1996. Prior to ABC's termination, the deferred warrant expense was being amortized over the life of the agreement. Consistent with its business plan and network strategy, the Company anticipates that its coverage of the United States will continue to expand during the year either through affiliation or acquisition of additional radio stations. The Company expects to incur operating losses as such network expansion increases, and that the losses will continue throughout 1996 and for 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity, as measured by its working capital, was $2,984,000 at June 30, 1996 compared to negative working capital of $4,421,000 at December 31, 1995. The increase in net working capital during the first half of 1996, was the result of the Company completing its public offering of common stock and repaying approximately $4,500,000 of short term debt and its corresponding accrued interest. The Company recently closed on the acquisition of a Philadelphia radio station, reducing the Company's working capital to a projected $500,000 as of September 30, 1996. Subsequent to June 30, 1996, the Company signed a purchase agreement to acquire a radio station in the Chicago market in January, 1997 which will require approximately $2,000,000 of cash at the time of closing. The Company considers Chicago to be a key market in connection with the Company's strategy of building a national radio network. Given the Company's current cash and working capital balance, the Company will be required to raise additional capital to complete the acquisition of the radio station in the Chicago market and provide working capital for the Company. The Company is seeking to raise additional capital to enable it to complete this acquisition and to provide working capital for 1997, but no assurance can be given that the Company will be able to do so on a timely basis or on terms which are acceptable to the Company. The failure to obtain such additional capital could result in a default by the Company under its agreement with the Seller and would result in the loss of the escrow deposit and this opportunity to acquire a station in this key market. The Company is continuing to develop its radio network and is generally subject to the risks attendant to a new or emerging business venture. The Company has incurred net losses since its inception in 1990 and has not generated positive cash flow sufficient to fund its ongoing operations. For the three years ended December 31, 1993, 1994, 1995 and the six months ended June 30, 1996, the Company incurred net losses of $3,247,000, $4,519,000, $6,107,000 and $5,244,000, respectively, and anticipates that it will continue to operate at a loss from operations for the remainder of 1996. Due to past and current operating losses, and because the Company has not generated positive cash flow from operations, the Company has had frequent working capital shortages. Working capital requirements have been met by short-term borrowings from investors, including affiliates of the Company, and from the proceeds of public offerings of the Company's Common Stock. The Company is seeking sources of financing for its working capital needs and for acquisitions, although it has no current commitments for such financing. Such arrangements could include the leveraging of Company's radio station properties under agreements with asset-based lenders. If the Company should be unable to obtain working capital when required, its operations and prospects would be materially and adversely affected. Depending upon the terms of such financing the Company's leverage would be significantly increased and dilution to existing shareholders may result if equity securities or rights to acquire equity securities are issued in connection therewith. Consolidated cash was $4,542,000 at June 30, 1996 and $587,000 at December 31, 1995, an increase of $3,955,000. The change in cash can be attributed to the cash raised at the completion of the public offering of common stock less the cash used to purchase stations in the New York and Detroit markets. Accounts receivable increased $74,000 from $805,000 at December 31, 1995. Prepaid expenses decreased $338,000 from December 31, 1995 while other receivables and inventory increased a total of $62,000. Accounts payable decreased $234,000 to $515,000 compared to the $750,000 balance at December 31, 1995. Other accrued expenses also decreased 12% from December 31, 1995 and accrued interest decreased $252,000 in the first six months of 1996. The increased amount of cash used for operations was a result of using the monies received through the Company's public offering of common stock to pay down interest and accounts payable. During the first six months of 1996, $13,476,000 was used for investing activities. This cash was used to purchase stations in the New York and Detroit markets. Cash obtained through financing activities amounted to $20,132,000 during the first half of 1996. This cash represents the monies received from the Company's public offering of common stock less the repayment of debt. SEASONALITY AND INFLATION The Company's revenues generally follow retail sales trends, with the fall season (September through December) reflecting the highest revenues for the year, due primarily to back-to-school and holiday season retail advertising, and the first quarter reflecting the lowest revenues for the year. The Company does not believe inflation has affected the results of its operations, and does not anticipate that inflation will have an impact on its future operation. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable ITEMS 2. THROUGH 5. None ITEM 6. The following documents filed by the company with the Commission (File No. 0-21534) are incorporated into this 10-QSB/A by reference: (a) The Company's 8-K Report filed on June 19, 1996 (File No. 0-21534), relating to acquisition of Radio Elizabeth, Inc.; (b) The Company's 8-K/A Report filed on June 21, 1996 (File No. 0-21534), relating to acquisition of Radio Elizabeth, Inc.; (C) The Company's 8-K Report filed on June 18, 1996 (File No. 0-21534), relating to acquisition of the assets of Radio Station WCAR-AM; and (d) The Company's 8-K/A Report filed on June 21, 1996 (File No. 0-21534), relating to acquisition of the assets of Radio Station WCAR-AM. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized. CHILDREN'S BROADCASTING CORPORATION Date: 10/17/96 BY: /s/ James G. Gilbertson -------- --------------------------- Treasurer (Chief Operating Officer and Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----