<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                 FORM 10-QSB


 (Mark One)

 /X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange 
     Act of 1934

     For Quarterly period ended June 30, 1998 or
                                -------------

 / / Transition report under 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 small business issuer 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, including zip code)

                                (612) 338-3300
                                --------------
                (Issuer's telephone number, including area code)

     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      
         -----       -----

     As of August 13, 1998, there were outstanding 6,869,004 shares of common 
stock, $.02 par value, of the registrant.

<PAGE>

INDEX

CHILDREN'S BROADCASTING CORPORATION

PART I.        FINANCIAL INFORMATION
------         ---------------------

Item 1.        Financial Statements (Unaudited)

               Consolidated Balance Sheets -- June 30, 1998 and 
               December 31, 1997.

               Consolidated Statements of Operations -- Three and six months 
               ended June 30, 1998 and 1997.

               Consolidated Statements of Cash Flows -- Six months ended 
               June 30, 1998 and 1997.

               Notes to Consolidated Financial Statements  -- June 30, 1998.


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 and Use of Proceeds
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


SIGNATURES

EXHIBIT INDEX

<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                       CHILDREN'S BROADCASTING CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              JUNE 30,          DECEMBER 31,
                                                                               1998                1997
                                                                          ------------        ------------
                                     ASSETS
<S>                                                                        <C>                 <C>         
Current assets:

       Cash and cash equivalents                                            $1,731,735            $545,258
       Accounts receivable                                                     489,392           1,696,756
            Allowance for doubtful accounts                                   (234,601)           (472,000)
       Accounts receivable - affiliates                                        136,438             142,868
       Prepaid expenses                                                        321,866             108,174
                                                                          ------------        ------------
                           TOTAL CURRENT ASSETS                              2,444,830           2,021,056

       Investment in Harmony                                                 6,479,931           6,281,728
       Property & equipment, net                                             4,374,417           4,708,327
       Broadcast license, net                                               19,094,770          19,679,154
       Intangible assets, net                                                1,582,996           1,550,100
       Deferred debt issue costs                                             1,771,499           1,173,209
                                                                          ------------        ------------
                            TOTAL ASSETS                                   $35,748,443         $35,413,574
                                                                          ------------        ------------
                                                                          ------------        ------------


                       LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities:
       Accounts payable                                                     $1,571,935          $1,688,832
       Accrued interest                                                        394,567             324,994
       Other accrued expenses                                                4,436,166           1,203,331
       Line of credit                                                          297,089             453,838
       Short-term debt                                                       1,250,000           1,172,500
       Long-term debt - current portion                                     25,169,299          22,857,386
       Obligation under capital lease - current portion                         29,014              26,367
                                                                          ------------        ------------
                            TOTAL CURRENT LIABILITIES                       33,148,070          27,727,248

       Long-term debt - net of current portions                              2,313,409           2,508,819
       Obligation under capital lease                                           37,154              48,836
                                                                          ------------        ------------
                            TOTAL LIABILITIES                               35,498,633          30,284,903
                                                                          ------------        ------------
Redeemable Convertible Preferred Stock
       Authorized shares - 606,061
       Issued and outstanding shares - 606,061 redeemable in 
         certain circumstances at $4.04 per share                            1,768,250                  --
Shareholders' equity:
       Common stock, $.02 par value:
            Authorized shares - 50,000,000
            Issued & outstanding shares - voting: 6,529,963
              1998 and 6,128,850--1997;
            Issued and outstaning shares - 189,041 nonvoting --
              1998 and 1997                                                    134,380             132,997
       Additional paid-in capital                                           47,336,309          46,387,536
       Stock subscription receivable                                          (529,563)           (529,563)
       Accumulated deficit                                                 (48,459,566)        (40,862,299)
                                                                          ------------        ------------
                            TOTAL SHAREHOLDERS' EQUITY                      (1,518,440)          5,128,671
                                                                          ------------        ------------
       TOTAL LIABILITIES & SHAREHOLDERS' EQUITY                            $35,748,443         $35,413,574
                                                                          ------------        ------------
                                                                          ------------        ------------
</TABLE>

<PAGE>


                       CHILDREN'S BROADCASTING CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED               SIX MONTHS ENDED
                                                              JUNE 30                        JUNE 30
                                                   -------------   -------------   -------------   -------------
                                                        1998            1997            1998            1997
                                                   -------------   -------------   -------------   -------------

<S>                                                 <C>             <C>             <C>             <C>         
REVENUES
       Owned, Operated and LMA Stations             $   539,496     $ 1,108,460     $ 1,284,176     $ 2,052,715
       Network                                           63,915         308,452         155,230         514,918
                                                   -------------   -------------   -------------   -------------
            REVENUES                                $   603,411     $ 1,416,912     $ 1,439,406     $ 2,567,633

OPERATING EXPENSES:
       Owned, Operated and LMA Stations:
            General and Administrative                  447,211         771,485         976,587       1,529,125
            Technical and Programming                   213,871         303,609         467,450         543,882
            Selling                                     107,911         555,083         216,175         896,598
                                                   -------------   -------------   -------------   -------------
                                                        768,993       1,630,177       1,660,212       2,969,605
       Network
            General and Administrative                   99,640         144,205         209,398         295,025
            Programming                                  91,938         219,931         217,039         426,911
            Selling                                      85,733         494,738         236,645         949,326
            Marketing                                    10,418          31,816          18,409         151,056
                                                   -------------   -------------   -------------   -------------
                                                        287,729         890,690         681,491       1,822,318
       Corporate                                      1,319,842       1,103,896       2,527,568       1,991,196
       Depreciation & Amortization                      546,730         544,472       1,093,621       1,003,035
                                                   -------------   -------------   -------------   -------------
            TOTAL OPERATING EXPENSES                  2,923,294       4,169,235       5,962,892       7,786,154
                                                   -------------   -------------   -------------   -------------
       LOSS FROM OPERATIONS                          (2,319,883)     (2,752,323)     (4,523,486)     (5,218,521)
       Equity Loss in Harmony                           453,956            --           926,797            --
       Interest Expense (Net of Interest Income)      1,144,579         403,208       2,146,984         717,204
                                                   -------------   -------------   -------------   -------------

            NET LOSS                                ($3,918,418)    ($3,155,531)    ($7,597,267)    ($5,935,725)
                                                   -------------   -------------   -------------   -------------
                                                   -------------   -------------   -------------   -------------


NET LOSS PER SHARE                                  ($     0.59)    ($     0.51)    ($     1.14)    ($     0.99)
                                                   -------------   -------------   -------------   -------------
                                                   -------------   -------------   -------------   -------------


WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING         6,688,000       6,133,000       6,673,000       6,019,500
                                                   -------------   -------------   -------------   -------------
                                                   -------------   -------------   -------------   -------------
</TABLE>


<PAGE>


                       CHILDREN'S BROADCASTING CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                         SIX MONTHS ENDED
                                                                                             JUNE 30
                                                                                 ----------------------------------
                                                                                     1998                  1997
                                                                                 ------------          ------------
<S>                                                                              <C>                   <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                         ($7,597,267)          ($5,935,725)

Adjustments to reconcile net loss to net
    cash from operating activities:
            Provision for doubtful accounts                                         (237,399)                   --
            Depreciation & amortization                                            1,093,621             1,003,035
            Amortization of deferred debt issue costs                                363,335                    --
            Net barter activity                                                       (8,632)               52,131
            Issuance of common stock for payment of attorney fees                         --                    --
            Issuance of common stock for payment of interest                          79,788                51,619
            Equity loss in Harmony                                                   926,797                    --
            Decrease (Increase) in:
                 Accounts Receivable                                               1,215,996               (51,319)
                 Other Receivables                                                     6,430                    --
                 Prepaid Expenses                                                   (213,692)             (151,280)
            Increase (Decrease) in:
                 Accounts Payable                                                   (116,897)              611,914
                 Accrued Interest                                                     69,573                40,307
                 Other Accrued Expenses                                            3,232,835               (83,803)
                                                                                -------------         -------------
       NET CASH USED IN OPERATIONS                                                (1,185,512)           (4,463,121)
                                                                                -------------         -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Sale/Purchase of Property & Equipment                                         (52,148)             (533,398)
       Investment in Harmony                                                      (1,125,000)                   --
       Sale/Purchase of Intangible Assets                                           (156,075)           (1,772,140)
                                                                                -------------         -------------
                 NET CASH USED IN INVESTING ACTIVITIES                            (1,333,223)           (2,305,538)
                                                                                -------------         -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Repayment of Capital Lease Obligation                                          (9,035)              (13,709)
       Payment of Debt                                                              (972,450)               29,765
       Proceeds from Debt Financings                                               2,817,447             6,015,000
       Proceeds from Issuance of Convertible Preferred Stock                       1,864,250                    --
       Proceeds from Issuance of Common Stock                                          5,000                60,619
                                                                                -------------         -------------
                 NET CASH PROVIDED BY FINANCING ACTIVITIES                         3,705,212             6,091,675
                                                                                -------------         -------------


Increase (Decrease) in Cash                                                        1,186,477              (676,984)
Cash - Beginning of Period                                                           545,258             3,370,038
                                                                                -------------         -------------
CASH - END OF PERIOD                                                              $1,731,735            $2,693,054
                                                                                -------------         -------------
                                                                                -------------         -------------


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
       Cash Paid During the Period for Interest                                   $1,695,407              $597,534
                                                                                -------------         -------------
                                                                                -------------         -------------

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
       During the six months ended June 30, 1998:
</TABLE>

            The Company recognized revenues of $91,790 and expenses of $83,158
            through barter activity.

            The Company issued 66,639 shares of common stock valued at $226,532
            for the payment of a principal and interest installment due in
            February, May and August 1998 totaling $146,744 and $79,788
            respectively, for the note payable outstanding to the seller of WAUR
            (AM).

            The Company incurred debt issuance costs aggregating $560,000 as a
            result of the issuance and repricing of warrants related to the
            Foothill financing, debt issuance cost aggregating $62,625
            resulting from the issuance of warrants related to the bridge 
            financing to purchase Harmony stock.


<PAGE>


Children's Broadcasting Corporation
Notes to Consolidated Financial Statements (unaudited)
June 30, 1998

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, 1998 are not necessarily indicative of the results that may be 
expected for the year ended December 31, 1998.  For further information, 
refer to the consolidated financial statements and footnotes thereto 
including in the Company's Form 10-KSB for the year ended December 31, 1997.

Note 2 Significant Transactions during 1998

The following significant transactions occurred during the first six months 
of 1998 and are considered non-recurring:

A.   In January 1998, the Company received proceeds totaling $611,000 and 
     paid debt issue costs of $39,000 through the issuance of a note payable 
     to Harmony Holdings, Inc. ("Harmony") with a face amount of $650,000.  
     The note payable bore interest at 15%, was unsecured and was due upon 
     demand.  The Company paid Harmony $323,000 of the principal plus related 
     interest on the note in May 1998, and paid the remaining $327,000 of 
     principal plus related interest in June 1998.

B.   In February 1998, the Company adopted a Shareholder Rights Plan designed 
     to enable the Company and its board to develop and preserve long-term 
     values for shareholders and to protect shareholders in the event an 
     attempt is made to acquire control of the Company through certain 
     coercive or unfair tactics or without an offer of fair value to all 
     shareholders.  The plan provides for distribution of a common share 
     purchase right to each shareholder of record of the Company's common 
     stock on February 27, 1998.  Under the plan, these rights to purchase 
     common shares will generally be exercisable a certain number of days 
     after a person or group acquires or announces an intention to acquire 
     20% or more of the Company's common stock.  Each right entitles the 
     holder, after the rights become exercisable, to receive shares of the 
     Company's common stock having a market value of two times the exercise 
     price of the right or securities of the acquiring entity at one-half 
     their market value at that time.

C.   On March 13, 1998, the Credit Agreement with Foothill Capital 
     Corporation ("Foothill") was amended.  Pursuant to the amendment, 
     Foothill issued an additional term note payable advance of $1,000,000 of 
     which the Company received proceeds totaling $900,000 and paid a loan 
     fee of $100,000.  The provisions of the Credit Agreement remained 
     substantially unchanged as a result of the amendment, except that the 
     variable interest rate was increased by 1%, a principal installment of 
     $500,000 due March 31, 1998 was deferred until April 16, 1998, and the 
     Company received a waiver of certain debt covenants which the Company 
     had not met as of March 31, 1998.  As additional consideration for the 
     amendment, the Company issued Foothill an additional warrant to purchase 


<PAGE>

     100,000 shares of the Company's common stock at a purchase price of 
     $3.68 per share and amended the exercise price of a previously granted 
     warrant to purchase 100,000 shares of common stock from $5.29 per share 
     to $3.68 per share.

D.   In April 1998, the Company signed a definitive purchase agreement with 
     Catholic Radio Network, LLC ("CRN") to sell the assets of ten of its 
     owned and operated stations including the stock of Children's Radio New 
     York, Inc., a subsidiary of the Company, for $57.0 million.  The total 
     purchase price includes $52.0 million in cash and a $5.0 million 
     subordinated secured promissory note.  The note will carry interest at 
     the rate of 10% per annum and will be payable in two years.  The Company 
     will have the option to convert the note to equity in CRN after 18 
     months.  CRN deposited $3.0 million into an escrow account, all of which 
     was released to the Company.  The consummation of the transaction is 
     subject to regulatory and shareholder approvals and customary closing 
     conditions.  The Company has received the Federal Communication 
     Commission's ("FCC") grants to the applications for assignment and 
     transfer of the licenses.

E.   In April 1998, the Company signed a definitive purchase agreement with 
     Salem Communications Corporation to sell the assets of two of its owned 
     and operated stations for a total purchase price of $2.7 million cash.  
     On April 27, 1998, $135,000 was deposited into an escrow account.  The 
     Company simultaneously entered into a pre-closing time brokerage 
     agreement regarding the stations until the transaction is consummated.  
     The consummation of the transaction is subject to regulatory and 
     shareholder approvals and customary closing conditions.  The Company has 
     received the FCC grants to the applications for assignment and transfer 
     of the licenses.

F.   In May 1998, the Company signed a definitive purchase agreement with 
     1090 Investments, LLC to sell the assets of WCAR(AM) in Detroit for a 
     purchase price of $2.0 million cash.  Pursuant to the terms of the 
     agreement, the buyer deposited $100,000 into an escrow account to be 
     held until closing.  The Company simultaneously entered into a 
     pre-closing time brokerage agreement to operate WCAR(AM) until the 
     transaction is consummated.  The transaction is subject to regulatory 
     and shareholder approvals and customary closing conditions.  The Company 
     has received the FCC grant to the application for assignment and 
     transfer of the license.

G.   In May 1998, the Credit Agreement with Foothill was again amended 
     effective April 17, 1998.  Pursuant to the amendment, the Company 
     obtained an additional term note payable advance of $2.0 million of 
     which the Company received proceeds totaling $1.0 million, paid a loan 
     origination fee of $200,000, and established an interest reserve of 
     $800,000 to be used for payment of future interest.  Also, pursuant to 
     the amendment, the variable interest rate was increased by 1% on the 
     entire outstanding loan balance, and the Company received a forbearance 
     of all principal payments and certain covenant requirements through 
     September 30, 1998.  As additional consideration for the amendment, the 
     Company issued Foothill an additional warrant to purchase 200,000 shares 
     of the Company's common stock at $3.31 per share.

H.   In May 1998, the Company issued 150,000 shares of its common stock to 
     its litigation counsel in connection with the ABC/Disney litigation.  
     The Company also registered such shares for resale.  The litigation 
     counsel must obtain approval from the Company prior to selling any 
     shares and using the proceeds to satisfy litigation 


<PAGE>

     expense.  As of this filing, none of these shares have been sold by the 
     litigation counsel. 

I.   In February and June 1998, the Company issued an aggregate of 66,639 
     shares of its common stock to satisfy three principal and interest 
     installments due, aggregating $226,531, to the seller of WAUR(AM). 

J.   In June 1998, pursuant to a Securities Purchase Agreement, the 
     Company issued 606,061 shares of its Series B Convertible Preferred 
     Stock ("this Series") to three accredited investors for which it 
     received gross proceeds of $2.0 million.  From the gross proceeds, the 
     Company paid a 6.25% commission to Pacific Continental Securities Corp.  
     After legal and escrow fees, the transaction resulted in net proceeds to 
     the Company of approximately $1,860,000.  The shares of this series have 
     a stated value of $3.30 per share.  The holders may require the Company 
     to redeem these shares for cash in certain circumstances between three 
     business days and 60 days following the CRN closing.  These shares may 
     be converted into a variable number of shares of common stock of the 
     Company incrementally over a period of time, in certain circumstances, 
     commencing October 23, 1998.  However, the Company may, at any time, 
     redeem all or part of the outstanding unconverted shares of this Series 
     through cash payments of approximately $4.04 per share.  In connection 
     with this financing, the Company issued a five-year warrant to the 
     investors for the purchase of an aggregate of 100,000 shares of the 
     Company's common stock at a per share exercise price of approximately 
     $3.77 (subject to adjustment). In addition, if the CRN closing does not 
     occur on or prior to September 30, 1998, the Company has agreed to issue 
     a five-year warrant to the investors for the purchase of an aggregate of 
     25,000 shares of the Company's common stock, at a per share exercise 
     price of the lesser of (i) approximately $3.77 or (ii) 80.77% of the 
     closing price of a share of common stock on September 30, 1998.  See 
     Part II, Item 2.

K.   In June 1998, using the proceeds of the above-referenced transaction (see 
     Note J), the Company exercised previously held options to purchase a 
     aggregate of 750,000 shares of common stock of Harmony at $1.50 per share 
     and repaid the remainder of the note due Harmony (see Note A).  
     Additionally, in July 1998, the Company made an open market purchase of 
     250,000 shares of common stock of Harmony at $1.73 per share.  The 
     purchase of these additional shares of Harmony's common stock resulted of 
     an increase in the Company's actual ownership in Harmony to approximately 
     44.1%.  The aggregate purchase price of $1,557,500 exceeded the Company's 
     pro rata share of Harmony's net tangible assets by approximately $1 
     million.  This excess purchase price relates to Harmony's intangible asset 
     value, principally technical know-how, industry reputation and customer 
     lists, and is being amortized on a straight line basis over a seven year 
     estimated useful life.

L.   In July 1997, the Company received proceeds aggregating $1.25 million in 
     exchange for the issuance of promissory notes payable and warrants to 
     purchase 125,000 shares of the Company's common stock to a partnership 
     controlled by a Company director, a Company director individually and a 
     less that five-percent shareholder.  These notes payable were to mature 
     in July 25, 1998.  In June 1998, the notes were amended to be payable on 
     October 25, 1998.  In connection with the amendment, the interest rate 
     to be received by one lender was increased to 20% per year effective 
     July 25, 1998, and warrants to purchase an aggregate of 37,500 shares of 
     the Company's common stock at approximately $3.06 per share were issued to 
     the other two lenders.


<PAGE>

M.   In July 1998, Harmony entered into a three-year, $5 million revolving 
     line of credit agreement with Heller Financial, Inc.  The Company 
     entered into an agreement to guarantee this line of credit (see exhibit 
     10.1).

Note 3 Investment in Harmony

     In 1997, the Company acquired an equity interest in Harmony by 
     purchasing 2,188,731 shares of Harmony's common stock and options to 
     acquire an additional 750,000 shares of Harmony's common stock.  The 
     Company exercised its options on June 30, 1998 and purchased additional 
     stock on the open market in July 1998 (see Note K).  Currently, the 
     Company's investment represents 44.1% of the outstanding common stock of 
     Harmony.  Harmony's most recent fiscal year end was June 30, 1998. 
     Harmony's operations are summarized as follows for the three and nine 
     months ended March 31, 1998:

<TABLE>
<CAPTION>

                                       Three Months      Nine Months
                                       Ended 3/31/98     Ended 3/31/98
                                       -------------     -------------

         <S>                            <C>               <C>
         Contract revenues              $14,750,601       $37,470,837
         Cost of production              11,861,074        30,115,564
                                        -----------       -----------

         Gross profit                     2,889,526         7,355,272
         Operating expenses               3,886,887         9,625,796
                                        -----------       -----------

         Income (loss) from
           Operations                      (997,361)       (2,270,524)
         Interest income                      4,466            21,717
                                        -----------       -----------

         Income (loss) before
           Income taxes                    (992,896)       (2,248,808)
         Income taxes                                          23,142
                                        -----------       -----------

         Net income (loss)              $  (992,896)      $(2,271,950)
                                        -----------       -----------

</TABLE>

         Harmonys financial information as of June 30, 1998 is not yet 
     available. The Company has utilized an estimate of Harmony's results from 
     operations in its computation of the equity loss in Harmony for the 
     quarter ended June 30, 1998.

     Item 2.   Management's Discussion and Analysis of Financial Condition and 
               Results of Operations

         This discussion and analysis contains certain forward-looking 
     terminology such as "believes", "expects", "anticipates", 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 
     risks described herein.

     General

         The Board of Directors of Children's Broadcasting Corporation 
     unanimously approved the sale of the Company's assets to Global 
     Broadcasting Company, Inc. ("Global"), subject to shareholder approval, 
     for $72.5 million in cash.  Shareholder approval for the sale was 
     obtained in January 1998.  However, on January 27, 1998, the Company 
     announced that Global had failed to close on the purchase of the 
     Company's radio stations within the time provided under the purchase 
     agreement between the parties.  On January 30, 1998, the Company 
     discontinued operation of Aahs World Radio, its 24-hour children's radio 
     programming, which it 

<PAGE>

     began broadcasting by satellite in late 1992.  The primary sources of 
     the Company's broadcast revenue, prior to the discontinuation of Aahs 
     World Radio, were from the sale of local advertising and air time and 
     network revenue.  The cessation of such broadcasting has negatively 
     impacted the Company's broadcast revenue.  On April 20, 1998, the 
     Company signed a definitive purchase agreement with Catholic Radio 
     Network, LLC ("CRN") to sell the assets of ten of its owned and operated 
     stations including the stock of Children's Radio New York, Inc., a 
     subsidiary of the Company for $57.0 million.  On April 29, 1998, the 
     Company signed a definitive purchase agreement with Salem Communications 
     Corporation to sell the assets of two additional owned and operated 
     stations for a total purchase price of $2.7 million cash.  On May 7, 
     1998, the Company signed a definitive purchase agreement with 1090 
     Investments, LLC to sell the assets of its remaining station in Detroit 
     for a purchase price of $2.0 million cash.

         Radio stations frequently barter unsold advertising time for products 
     or services, such as hotels, restaurants and other goods used principally 
     for promotional, sales and other business activities.  Barter revenues 
     and expenses are included in the financial presentation below.  The 
     revenue and expenses related to barter do not have a material effect on 
     the Company's operating profit in a given period.

     Results of Operations:

         Three and Six Months ended June 30, 1998 compared to Three and Six 
     Months ended June 30, 1997.

         Revenue:

               Owned, Operated and LMA Station Revenues:

               Total revenues from the Company's owned, operated and LMA 
     stations decreased $569,000 or 51% from $1,108,000 in the second quarter 
     of 1997 to $540,000 in the second quarter of 1998.  Revenues during the 
     first half of 1998 decreased 37% from $2,053,000 in 1997 to $1,284,000 
     in 1998.  This decrease in revenue can be attributed to the cessation of 
     broadcasting the Aahs World Radio format and the reduction of sales 
     force at various stations in anticipation of the sale of the Company's 
     owned and operated stations.

               Network:

               Total revenues of $64,000 were produced by the network during 
     the second quarter of 1998 compared to revenues of $308,000, a decrease 
     of $244,000 or 79%, compared to the second quarter of 1997 revenues.  
     Revenues for the first half of 1998 decreased $360,000 or 70% compared 
     to the same period in 1997.  This decrease in network revenues was due 
     to the cessation of broadcasting the Aahs World Radio programming on 
     January 30, 1998.

         Operating Expenses:

               Owned, Operated and LMA Station Expenses:

               General and administrative expenses decreased 42% to $447,000 
     for the second quarter of 1998 from $771,000 in the same period of 1997. 
     These expenses decreased $553,000 or 36% for the first six months of 
     1998 compared to the same period in 1997.  This decrease was due to the 
     Company's reduction in staff at the stations, which eliminated not only 
     personnel but also general 


<PAGE>

     office overhead expenses.  Additionally, the Company has entered into 
     Local Marketing Agreements ("LMA's") pertaining to KTEK(AM) in Houston, 
     KYCR(AM) in Minneapolis, and WCAR(AM) in Detroit.  These LMA's have 
     substantially reduced the Company's expenses at these stations.  
     Expenses will continue to diminish as the stations are sold.

               Technical and programming expenses decreased to $214,000 in 
     the second quarter of 1998 from $304,000 during the same period in 1997, 
     a decrease of 30%.  During the first six months of 1998, these expenses 
     decreased 14% compared to the same period in 1997.  Expenses will 
     continue to diminish as the stations are sold.

               Sales expenses totaled $108,000 in the second quarter of 1998 
     compared to $555,000 in the second quarter of 1997.  During the first 
     half of 1998, these expenses decreased 76% compared to the same period 
     in 1997.  This decrease is due to the reduction of sales personnel in 
     anticipation of the sale of the Company's stations.  Expenses will 
     continue to diminish as the stations are sold.

               Network Expenses:

               General and administrative expenses decreased $44,000 in the 
     second quarter of 1998 to $100,000 as compared to $144,000 for the 
     second quarter of 1997.  These expenses decreased 29% during the first 
     six months of 1998 as compared to the same period in 1997 due to the 
     reduction in general overhead expenses tied to the cessation of 
     broadcasting of Aahs World Radio programming.

               Programming expenses decreased $128,000 to $92,000 in the 
     second quarter of 1998 compared to $220,000 in the same period of 1997, 
     and decreased $210,000 to $217,000 in the first half of 1998 from 
     $427,000 during the first half of 1997.  This decrease was due to the 
     reduction of staff due to the discontinuation of broadcasting of Aahs 
     World Radio programming and in anticipation of the sale of the Company's 
     owned and operated stations.

               Sales expenses decreased 83% from $495,000 in the second 
     quarter of 1997 to $86,000 in the same period of 1998. These expenses 
     decreased 75% from $949,000 during the first half of 1997 to $237,000 in 
     the same period of 1998.  This decrease was due to the reduction of 
     sales personnel in conjunction with the discontinuation of broadcasting 
     the Aahs World Radio format.

               Marketing expenses were $10,000 during the second quarter of 
     1998 compared to $32,000 in the second quarter of 1997, representing a 
     decrease of 69%.  During the first six months of 1998, marketing 
     expenses decreased $133,000 or 88% compared to the same period of 1997, 
     due to the elimination of the Company's marketing effort in conjunction 
     with the cessation of broadcasting of Aahs World Radio programming on 
     January 30, 1998.

               Corporate charges were $1,320,000 in the second quarter of 
     1998 compared to $1,104,000 in the second quarter of 1997, representing 
     an increase of 20%.  Corporate charges increased 27% in the first six 
     months of 1998 compared to the same period in 1997.  This increase is 
     attributable to a $713,000 increase in legal fees incurred relating to 
     the ABC/Disney litigation during the first half of 1998 compared to the 
     first half of 1997. Decreases in corporate charges of $214,000 were 
     realized due to a decrease in personnel expense, outside services and 
     travel expenses.  The ABC/Disney litigation is anticipated to 


<PAGE>

     continue to utilize a significant portion of the Company's working 
     capital.  Further, professional services required in connection with the 
     sale of the Company's owned and operated stations will reduce the 
     Company's working capital.

               Depreciation and amortization remained steady during the 
     second quarter of 1998 increasing only $2,000.  During the first half of 
     1998, these expenses increased $91,000 or 9% over the same period in 
     1997.  The increase in depreciation and amortization has been minimal as 
     the Company has not been acquiring radio broadcast licenses ("RBLs") and 
     certain related assets as it had been in the past.

               Net interest expense for the second quarter of 1998 was 
     $1,145,000, an increase of $742,000 over the second quarter of 1997.  
     Net interest expense for the first half of 1998 increased 199% from 
     $717,000 to $2,147,000, as a result of the interest increase associated 
     with the additional financing provided by Foothill Capital Corporation 
     ("Foothill") and the interest payable to the lenders who provided $1.25 
     million for the purchase of stock in Harmony Holdings, Inc. ("Harmony").

               The net loss increased 24% in the second quarter of 1998 to 
     $3,918,000 from $3,156,000 in the second quarter of 1997.  During the 
     first six months of 1998 the net loss increased $1,661,000 to $7,597,000 
     from $5,936,000 in the first six months of 1997, an increase of 28%.

     Liquidity and Capital Resources

         The Company's liquidity, as measured by its working capital, was a 
     deficit of $30,703,000 at June 30, 1998 compared to a deficit of 
     $25,706,000 at December 31, 1997.

         During the first half of 1998, the Company used $1,186,000 cash for 
     in operating activities.  While the sale by the Company of its stations 
     is expected to further reduce future broadcast revenue, the Company has 
     implemented measures to decrease its expenses to offset the loss of 
     revenue.  Additionally, the Company ceased producing and distributing 
     its full-time Aahs World Radio programming format as of January 30, 
     1998.  Concurrent with the announcement of this termination of network 
     programming, the Company initiated certain reductions in its workforce 
     related to the operation of the network and the stations.

         In January 1998, the Company received proceeds totaling $611,000 and 
     paid debt issue costs of $39,000 through the issuance of a note payable 
     to Harmony with a face amount of $650,000.  The note payable, which has 
     subsequently been repaid, bore an interest rate of 15%, was unsecured and 
     was due upon demand (see Note A).

         The Company entered into second and third amendments to its Credit 
     Agreement with Foothill in March and May 1998, pursuant to which the 
     Company obtained additional term note payable advances totaling $3,000,000 
     of which the Company received net proceeds totaling $1,900,000, paid loan 
     origination fees of $300,000, and established an interest reserve of 
     $800,000 to be used for payment of future interest (see Notes C & G)

         In June 1998, the Company issued 606,061 shares of its Series B 
     Convertible Preferred Stock ("this Series") to three accredited investors 
     for which it received gross proceeds of $2,000,000.  Net proceeds to the 
     Company after commissions and legal fees were approximately $1,900,000. 
     With the proceeds, the Company 


<PAGE>

     exercised its stock options to acquire 750,000 shares of Harmony, 
     purchased 250,000 additional shares of Harmony common stock on the open 
     market, and repaid the above-referenced debt obligation to Harmony.  The 
     Company current ownership in Harmony is 44.1% (see Notes J & K).

         The Company believes that the financing it received from Foothill in 
     connection with the second and third amendments to the Credit Agreement 
     and the escrow releases ($3.0 million) from CRN during the second 
     quarter of 1998 will be sufficient to operate the Company through the 
     sale of the Company's radio stations.  The sale of the Company's radio 
     stations is expected to provide the Company with sufficient working 
     capital to meet its cash requirements on an ongoing basis.  If any such 
     sale is delayed or does not occur, the Company believes it will need to 
     obtain alternative financing.  Because the Credit Agreement with 
     Foothill requires the Company to grant liens and security interests on 
     substantially all of its assets, the Company's ability to incur 
     additional indebtedness may be limited.  In addition, the outstanding 
     shares of Series B Convertible Preferred Stock may have the effect of 
     limiting the Company's ability to engage in future equity financings.  
     If the Company is not able to obtain adequate financing, or financing 
     on acceptable terms, it could be forced to reduce or terminate its 
     operation, curtail future acquisitions or other projects, sell or lease 
     its current assets under unfavorable circumstances, delay certain 
     capital projects or potentially default on obligations to creditors, all 
     of which may be materially adverse to the Company's operation and 
     prospects.

         Consolidated cash was $1,732,000 at June 30, 1998 and $545,000 at 
     December 31, 1997, an increase of $1,187,000.

         Accounts receivable at June 30, 1998 decreased $970,000 from 
     December 31, 1997, other receivables decreased $6,000, and prepaid 
     expenses at June 30, 1998 increased $214,000 from December 31, 1997.  
     Accounts payable at June 30, 1998 decreased $117,000 from December 31, 
     1997, accrued interest increased $70,000 from December 31, 1997 to June 
     30, 1998 and other accrued expenses increased $3,233,000 during that 
     same period.  The $1,186,000 cash used for operations was provided by 
     the proceeds obtained through the Foothill financing and CRN escrow 
     releases.

         During the first half of 1998, $1,333,000 of cash was used for 
     investing activities.  This cash was used primarily for the additional 
     investment in Harmony and was provided by the Securities Purchase 
     Agreement described above.

         Cash obtained through financing activities amounted to $3,705,000 
     during the first half of 1998.  This cash represents the $1,900,000 term 
     loan advance from Foothill, the $1,900,000 net proceeds obtained through 
     the issuance of convertible preferred stock pursuant to a Securities 
     Purchase Agreement, and the $5,000 obtained through the issuance of 
     common stock through the exercise of stock options, 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 


<PAGE>

     does not anticipate that inflation will have an impact on its future 
     operation.

PART II.       OTHER INFORMATION

Item 1.        Legal Proceedings

         The Company's former business strategy was to derive revenue from 
the sale of network advertising time to national advertisers and from local 
advertising sales from Company-owned or operated stations.  The Company's 
strategy, in entering into an operations agreement with ABC Radio, was to use 
the resources and reputation of ABC Radio to market Aahs World Radio, attract 
national advertising and further build the Company's network through 
affiliations.  The Company sought out and developed strategic relationships 
in order to enhance and reinforce its brand, and to allow the Company to 
explore business opportunities at minimal cost to it and without detracting 
from management's focus upon the Company's core business.  In 1995, the 
Company developed such a relationship with ABC Radio, pursuant to which ABC 
Radio agreed, through representations and agreements, that ABC Radio would 
commit its affiliate development and national advertising sales staffs and 
other resources to assist and augment the Company's efforts to market the Aha 
World Radio format to broadcasters and advertisers. Throughout the course of 
its relationship with ABC Radio, the Company disclosed significatn 
confidential proprietary business information to ABC/Disney. In June 1996, 
ABC Radio announced to the Company that ABC Radio was terminating its 
relationship with the Company and that ABC Radio would join with Disney to 
immediately commence competing directly with the Company in the field of 
childrens radio broadcasting. ABC/Disney thereupon rolled out its Radio 
Disney programming at several locations throughout the country. The Company 
filed a lawsuit in the fall of 1996 with the United States District Court for 
the District of Minnesota against ABC/Disney. The suit seeks injunctive 
relief and to recover substantial monetary damages based on alleged wrongful 
conduct by ABC/Disney, including acts and omissions of fraud, business 
interference, breach of contractual and fiduciary obligations and 
misappropriation of the Companys confidential and proprietary business 
information, trade secrets and business opportunities. In September 1997, ABC 
Radio asserted its own counterclaim for breach of contractual obligations, 
seeking to recover an unspecified amount of damages said only to "exceed 
$75,000.00" for an alleged failure by the Company to pay certain commissions 
and fees allegedly earned during the course of the parties relationship. The 
Company denies ABC Radio's counterclaim in all respects, and has moved to have 
the counterclaim dismissed as untimely. Trial will commence on August 31, 
1998.

Item 2.        Changes in Securities and Use of Proceeds

         a.    Not applicable.

         b.    Not applicable.

<PAGE>

         c.    Sales of Unregistered Securities During the Second Quarter of 
               1998

         On May 21, 1998, the Company's Credit Agreement with Foothill was 
amended effective April 17, 1998.  Pursuant to the amendment, the Company 
received an additional term note payable advance of $2.0 million, of which 
the Company received proceeds totaling $1.0 million, paid a loan origination 
fee of $200,000, and established an interest reserve of $800,000 to be used 
for payment of future interest.  Also, pursuant to the amendment, the 
variable interest rate was increased by 1% on the entire outstanding loan 
balance, and the Company received a forbearance of all principal payments and 
certain covenant requirements through September 30, 1998.  As additional 
consideration for the amendment, the Company issued a warrant to Foothill, 
exercisable at $3.31 per share, to purchase 200,000 shares of the Company's 
Common Stock.  Such warrant expires on November 25, 2001.  Through August 12, 
1998, the Company had issued warrants to Foothill, exercisable at prices 
ranging from $3.31 to $4.40 per share, to purchase a total of 650,000 shares 
of the Company's Common Stock in connection with the Credit Agreement and the 
amendments thereto.

         On May 18, 1998, the Company issued 150,000 shares of its Common 
Stock, to be periodically released from a trust account, to Hessian & McKasy, 
P.A. ("Hessian").  Pursuant to a retainer agreement, the Company paid such 
shares to Hessian as a retainer for legal fees incurred and to be incurred in 
connection with the ABC/Disney litigation.  Under the retainer agreement, 
Hessian will 


<PAGE>

periodically invoice the Company for legal fees and costs incurred in 
connection with the litigation.  The Company will determine at such time 
whether it desires to pay the billing in cash with the Company's funds or 
whether it will authorize Hessian to sell shares in satisfaction of the 
invoice.  The number of shares which may be sold will be equal to the amount 
of the particular billing divided by the bid price of the Company's stock on 
the Nasdaq National Market as of the date the Company notifies Hessian of its 
authorization to pay a particular legal fee billing in shares. In the event 
of the sale of shares by Hessian to satisfy billings, any shortfall in 
proceeds received from such sale shall be added to the Company's obligation 
to such firm and carried forward to a future billing.  In the event the 
proceeds from the sale of shares by Hessian exceed the amount of the billing 
for which such shares are to be sold, such excess shall be credited to 
future legal fees due such firm.  In lieu of selling shares following the 
submission of a billing to the Company, Hessian may elect to retain shares in 
satisfaction of a billing, in which case the market risk from the sale of such 
shares would be borne by Hessian. Lance W. Riley, the Company's Secretary and 
General Counsel, has an of counsel relationship with Hessian.  Through August 
12, 1998, the Company had issued a total of 350,000 shares of its Common 
stock to Hessian pursuant to the retainer agreement.

         In connection with the July 1997 acquisition by the Company of 
shares of common stock of Harmony Holdings, Inc. ("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 
Perkins Capital Management, Inc. ("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, initially payable on 
July 25, 1998, and recently amended to be payable on October 25, 1998.  
Five-year warrants to purchase an aggregate of 125,000 shares of Common Stock 
at $4.00 per share were issued to those lenders in July 1997.  On June 11, 
1998, in connection with the amendment to such notes, (i) the interest rate 
on the note issued to Mr. Burwell was increased to 20% per year effective 
July 25, 1998, (ii) an additional five-year warrant to purchase 25,000 shares 
of Common Stock at $3.0625 per share was issued to Pyramid Partners, L.P. and 
(iii) an additional five-year warrant to pruchase 12,500 shares of Common 
Stock at $3.0625 per share was issued to Mr. Toles.

         On June 30, 1998, the Company closed on the transaction contemplated 
by its Securities Purchase Agreement with Talisman Capital Opportunity Fund 
Ltd., Dominion Capital Limited and Sovereign Partners LP, dated June 25, 
1998.  Pursuant to such agreement, the Company issued 606,061 shares of its 
Series B Convertible Preferred Stock ("this Series") to three accredited 
investors for which it received gross proceeds of $2,000,000.  From the gross 
proceeds, the Company paid a 6.25% commission to Pacific Continental 
Securities Corp.  The transaction resulted in net proceeds to the Company of 
approximately $1,850,000.

         The shares of this Series have a stated value of $3.30 per share 
(the "Stated Value") and are redeemable for cash in certain circumstances.  
At any time on or before the date which is 60 days following the closing of 
the transaction contemplated by the Purchase Agreement between the Company 
and Catholic Radio Network, LLC, dated April 17, 1998 (the "CRN Closing"), 
but in no event earlier than three business days after the CRN Closing, if the 


<PAGE>

holders of at least 25% of the outstanding unconverted shares of this 
Series so elect, the Company shall, to the extent that funds are legally 
available therefor, redeem all of the outstanding unconverted shares of this 
Series by payment in cash of the sum equal to 122.5% of the Stated Value for 
each outstanding unconverted share of this Series (appropriately adjusted to 
reflect stock splits, stock dividends, reorganizations, consolidations and 
similar changes).  If the Company so elects, it may at any time, to the 
extent that funds are legally available therefor, redeem all or any part of 
the outstanding unconverted shares of this Series, upon payment in cash of 
the sum equal to 122.5% of the Stated Value for each outstanding unconverted 
share of this Series (appropriately adjusted to reflect stock splits, stock 
dividends, reorganizations, consolidations and similar changes).

         The shares of this Series may also be converted into shares of 
Common Stock of the Company in certain circumstances.  At the option of the 
holder, at any time after the date 120 days following the closing date, the 
shares of this Series shall, subject to the schedule presented in the 
following paragraph, be convertible, into fully paid and nonassessable shares 
of Common Stock, at the conversion price in effect at the time of conversion, 
each share of this Series being deemed to have the stated Value for the 
purpose of such conversion.  The number of shares of Common Stock to be 
delivered upon conversion of a share of this Series shall be the Stated 
Value, divided by the lesser of (x) 110% of the average best bid price of the 
Common Stock for the five consecutive trading days ending on the day 
preceding the conversion date, or (y) 94% of the average of the three lowest 
closing prices of the Common Stock during the 60 calendar day period ending 
on the day preceding the conversion date; provided, however, that such 
initial conversion price shall be subject to adjustment from time to time in 
certain instances.  The number of shares so issuable upon conversion shall be 
multiplied by the number of shares of this Series to be converted, and the 
product thereof shall be delivered to the holder.  Notwithstanding the 
foregoing, if the Common Stock is not traded on the New York Stock Exchange, 
the American Stock Exchange, the Nasdaq National Market or the Nasdaq 
SmallCap Market on the conversion date, then the percentage specified in 
clause (y) above shall be 84%.

         The shares of this Series may be converted, at the option of the 
holder, in accordance with the following schedule:

<TABLE>
<CAPTION>


        Number of Days                        Percentage of Original
        Elapsed Following Issuance            Preferred Stock Convertible
        --------------------------            ---------------------------
                 <S>                                   <C>
                  120                                    20%
                  150                                    40%
                  180                                    60%
                  210                                    80%
                  240                                   100%

</TABLE>

         In the case of the call for redemption of any shares of this Series, 
such right of conversion shall cease and terminate as to the shares 
designated for redemption on the day such shares are actually redeemed by the 
Company; provided, however, that the holder may, upon giving a conversion 
notice to the Company within ten business days after receipt of the Company's 
notice of redemption, convert such number of shares of this Series as such 
holder would have been entitled to convert had such notice of redemption not 
been given by the Company.  In the event that any shares of this Series have 
not been redeemed or converted into 


<PAGE>

Common Stock on or before June 15, 2002, such shares shall automatically be 
converted.

         In connection with the above-referenced financing, the Company 
issued a five-year warrant to the investors for the purchase of an aggregate 
of 100,000 shares of the Company's Common Stock, at a per share exercise 
price of $3.7734375.  In addition, if the CRN Closing does not occur on or 
prior to September 30, 1998, the Company has agreed to issue a five-year 
warrant to the investors for the purchase an aggregate of 25,000 shares of 
the Company's Common Stock, at a per share exercise price of the lesser of 
(i) $3.7734375 or (ii) 80.77% of the closing price of  a share of Common 
Stock on September 30, 1998.

         All of the above issuances were made in reliance upon the exemption 
provided in Section 4(2) of the Securities Act of 1933, as amended (the 
"Act"), which provides an exemption for transactions not involving a public 
offering.  The purchasers of the securities described above acquired them for 
their own accounts and not with a view to any distribution thereof to the 
public.  At their issuance, the foregoing securities were restricted as to 
sale or transfer, unless registered under the Act, and certificates 
representing such securities contained restrictive legends stating that the 
securities were not to be offered, sold or transferred other than pursuant to 
an effective registration statement under the Act, or an exemption from such 
registration.  In addition, the recipients of such securities received or had 
access to material information concerning the Company, including but not 
limited to the Company's reports on Form 10-KSB, Form 10-QSB and Form 8-K, as 
filed with the Securities and Exchange Commission.  Other than the commission 
paid to Pacific Continental Securities Corp., no underwriting commissions or 
discounts were paid with respect to the issuances of the securities described 
above.

         d.    Not applicable.

Item 3.        Defaults upon Senior Securities

         Not applicable.

Item 4.        Submission of Matters to a Vote of Securities Holders

         Not applicable.

Item 5.        Other Information

         In July 1998, Harmony entered into a three-year, $5 million 
         revolving line of credit agreement with Heller Financial, Inc. The 
         Company entered into an agreement to guarantee this line of credit 
         (see exhibit 10.1).

Item 6.        Exhibits and Reports on Form 8-K


         a.    Exhibits

               10.1  Guaranty between and among Children's Broadcasting 
               Corporation and Heller Financial, Inc., dated July 30, 1998.

               27    Financial Data Schedule

         b.    Current Reports on Form 8-K

               The Company filed the following Current Reports on Form 8-K with 
               the Commission (File No. 0-21534) during the quarter for which 
               this report is filed:


<PAGE>

               1.    The Company's Current Report on Form 8-K filed on June 
               5, 1998, relating to the Company obtaining an additional term 
               note payable advance of $2.0 million from Foothill Capital 
               Corporation.

               2.    The Company's Current Report on Form 8-K filed on May 7, 
               1998, relating to the Company signing a purchase agreement 
               with Salem Communications Corporation for the sale of two of 
               the Company's radio stations for $2.7 million.

               3.    The Company's Current Report on Form 8-K filed on April 
               22, 1998, relating to the Company signing a purchase agreement 
               with Catholic Radio Network, LLC for the sale of ten of the 
               Company's radio station for $57.0 million.


<PAGE>

                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized on August 13,1998.

                                           CHILDREN'S BROADCASTING
                                           CORPORATION

                                           By:  /s/ Patrick D. Grinde  
                                                -----------------------
                                                Chief Financial Officer

<PAGE>


EXHIBIT INDEX

        10.1   Guaranty between and among Childrens Broadcasting Corporation 
        and Heller Financial, Inc., dated July 30, 1998.

        27     Financial Data Schedule