<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10-Q
(x) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997 or
( ) Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number: 0-28432
Boston Communications Group, Inc.
---------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3026859
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Sylvan Road, Woburn, Massachusetts 01801
--------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (617)692-7000
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(Former name, former address, 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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of July 30, 1997 the Company had outstanding 13,005,221 shares of common
stock, $.01 par value per share.
1
<PAGE>
INDEX
PAGE NUMBER
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets.......................................3
Consolidated Statements of Operations.............................4
Consolidated Statements of Cash Flows.............................5
Notes to Consolidated Financial Statements........................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................7
Certain Factors That May Affect Future Results...................11
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings.................................................13
Item 4. Submission of Matters to a Vote of Security Holders...............13
Item 6. Exhibits and Reports on Form 8-K..................................13
2
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1996 1997
---- ----
<S> <C> <C>
Current assets:
Cash $ 923 $ 837
Short-term investments 20,498 2,962
Accounts receivable, net of allowance for
billing adjustments and doubtful accounts
of $ 1,242 in 1996 and $ 1,279 in 1997 11,060 15,059
Inventory 1,189 2,434
Deferred income taxes 1,334 1,334
Prepaid expenses and other assets 495 1,000
------ ------
Total current assets 35,499 23,626
Property and equipment, net 12,906 27,381
Goodwill, net 3,159 2,943
Other assets 395 432
------ ------
Total assets $ 51,959 $ 54,382
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,371 $ 3,294
Accrued expenses 7,205 6,753
Income taxes payable 490 553
------ -------
Total current liabilities 9,066 10,600
Shareholders' equity:
Preferred Stock, par value $.01
per share, 2,000,000 shares authorized,
0 shares issued and outstanding - -
Common Stock, voting, par value $.01 per share,
35,000,000 shares authorized, 12,725,749 and
12,905,782 shares issued in 1996 and 1997,
respectively 127 129
Additional paid-in capital 52,738 53,489
Treasury stock (46,420 shares, at cost) (372) (372)
Accumulated deficit (9,600) (9,464)
------ ------
Total shareholders' equity 42,893 43,782
------ ------
Total liabilities and shareholders' equity $ 51,959 $ 54,382
====== ======
</TABLE>
3
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Roaming services $ 8,327 $ 8,048 $15,541 $15,060
Teleservices 3,303 4,375 7,150 8,164
Prepaid wireless services 69 1,513 69 2,303
System sales 1,141 2,417 1,233 6,445
------ ------ ------ ------
12,840 16,353 23,993 31,972
Expenses:
Cost of service revenues 9,465 10,882 17,775 20,301
Cost of system revenues 553 1,095 590 3,735
Engineering, research and
development 744 1,168 1,163 2,197
Sales and marketing 638 1,230 1,196 2,293
Related party management fees - - 252 -
General and administrative 621 824 1,103 1,473
Depreciation and amortization 477 1,203 837 2,093
------ ------ ------ ------
Total operating expenses 12,498 16,402 22,916 32,092
------ ------ ------ ------
Operating income(loss) 342 (49) 1,077 (120)
Interest income(expense), net (75) 135 (81) 397
------ ------ ------ ------
Income before income taxes 267 86 996 277
Provision for income taxes 123 43 423 141
------ ------ ------ ------
Net income 144 43 573 136
Accretion of dividends on
redeemable preferred stock (214) - (451) -
------ ------ ------ ------
Net income(loss) available to
common shareholders $ (70) $ 43 $ 122 $ 136
====== ====== ======= ======
Net income(loss) available to
common shareholders per common
share $ (0.01) $ 0.00 $ 0.01 $ 0.01
====== ====== ====== ======
Shares used in computing net
income(loss) available to
common shareholders per common
share 9,489 13,649 9,334 13,266
====== ====== ====== ======
</TABLE>
4
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
1996 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 573 $ 136
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 838 2,092
Deferred income taxes 525 -
Changes in operating assets and liabilities,
excluding effect of business acquisitions:
Accounts receivable (4,252) (3,999)
Inventory - (1,245)
Prepaid expenses and other assets (830) (566)
Accounts payable and accrued expenses 1,595 1,471
Income taxes payable (400) 63
------ ------
Net cash used in operations (1,951) (2,048)
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired (497) -
Investment in non-marketable securities (110) -
Purchase of property and equipment (2,942) (16,327)
Sales of short-term investments - 17,536
------ ------
Net cash provided by(used in) in investing
activities (3,549) 1,209
FINANCING ACTIVITIES
Proceeds from exercise of stock options 21 753
Proceeds from issuance of common stock 44,490 -
Redemption of redeemable preferred stock (16,347) -
Repayment of capital leases (70) -
------ ------
Net cash provided by financing activities 28,094 753
------ ------
Increase(decrease) in cash and cash equivalents 22,594 (86)
Cash and cash equivalents at beginning of period 253 923
------ ------
Cash and cash equivalents at end of period $ 22,847 $ 837
====== ======
Supplemental disclosure of noncash transactions:
Capital lease obligations $ 1,507
=====
Shares issued in connection with acquisition of
business $ 2,000
=====
</TABLE>
5
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements have been prepared by
the Company, without audit, and reflect all adjustments which in the
opinion of management, are necessary for a fair statement of the results of
the interim periods presented. All adjustments were of a normal recurring
nature. Certain information and footnote disclosures normally included in
the annual consolidated financial statements which are prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. Accordingly, the Company believes that although the
disclosures are adequate to make the information presented not misleading,
the consolidated financial statements should be read in conjunction with
the footnotes contained in the Company's Form 10-K for the fiscal year
ended December 31, 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Standard No. 128, "Earnings Per Share" which simplifies the
calculation of earnings per share (EPS) and creates a standard of
comparability to the recently issued International Accounting Standard No.
33, "Earnings Per Share". Since early application is not permitted, the
Company will adopt this standard in the fourth quarter of 1997. Its
adoption does not have a material effect on the Company's financial
position or results of operations in the first six months of 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." Both SFAS No. 130 and SFAS No. 131 are effective for
fiscal years beginning after December 15, 1997. The Company believes that
the adoption of these new accounting standards will not have a material
impact on the Company's consolidated financial statements.
2. Inventory
Inventories consist of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Purchased parts $ 1,468 $ 984
Work-in-process 699 129
Finished goods 267 76
----- -----
$ 2,434 $ 1,189
===== =====
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - June 30, 1996 and 1997
- ----------------------------------------------
Service and system revenues
- ---------------------------
Total revenues increased 28.1% from $12.8 million in the three months ended June
30, 1996 to $16.4 million in the three months ended June 30, 1997 and increased
33.3% from $24.0 million in the six months ended June 30, 1996 to $32.0 million
in the six months ended June 30, 1997. Roaming service revenues decreased 3.3%
or $279,000 from the three months ended June 30, 1996 to the same period ended
June 30, 1997 and decreased 3.1% or $481,000 from the six months ended June 30,
1996 to the same period ended June 30, 1997. The decrease in roaming service
revenues resulted from declining trends in industry-wide cellular roaming and
the decrease in the frequency of the suspension of intercarrier roaming
agreements due to improved fraud controls implemented by the carriers.
Teleservice revenues increased 33.3% or $1.1 million and 13.9% or $1.0 million,
respectively, for the three month and six month periods ended June 30, 1997
compared to the same periods in the prior year. The increase resulted primarily
from additional service programs provided to new carrier customers, the
expansion of services provided to existing customers and the addition of
teleservice programs for users of the Company's prepaid wireless services.
Revenues generated from prepaid wireless services increased substantially from
$69,000 to $1.5 million and $69,000 to $2.3 million, respectively for the three
and six month periods ended June 30, 1997 as compared to the same periods in the
prior year. The increases were due to the increase in the number of markets
where C2C prepaid services were commercially available and increased usage in
those markets. As of June 30, 1997, thirty-three C2C Network switches were
deployed in various markets throughout the United States. Of these switches,
twenty-seven were fully operational and processing live transactions by the end
of the second quarter. System sales increased 118.2% or $1.3 million from the
three month period ended June 30, 1996 to the same period ended June 30, 1997
and increased 433.3% or $5.2 million from the six month period ended June 30,
1996 to the same period ended June 30, 1997. The increase resulted primarily
from the sale of systems to continue the expansion of prepaid wireless systems
throughout Mexico and South America.
Cost of service revenues
- ------------------------
Cost of service revenues consists primarily of cellular network and landline
costs to support both roaming and prepaid wireless services in addition to the
direct labor and benefits associated with operator assisted roaming service
calls and teleservice calls. Cost of service revenues decreased from 80.9% of
service revenues for the three months ended June 30, 1996 to 78.1% of service
revenues for the three months ended June 30, 1997. The decrease in cost of
service revenues as a percentage of service revenues was due primarily to a
significant increase in prepaid wireless service revenues which was greater than
the corresponding increase in fixed costs. Cost of service revenues increased
from 78.1% of service revenues for the six months ended June 30, 1996 to 79.5%
of service revenues for the six months ended June 30, 1997. The increase in
cost of service revenues as a percentage of service revenues was primarily due
to the high initial operating costs as subscribers are added and usage is
generated on the C2C Network.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - June 30, 1996 and 1997 (continued)
- ----------------------------------------------------------
Cost of system revenues
- -----------------------
Cost of system revenues represents the cost of prepaid and voice systems sold.
Cost of system revenues decreased from 48.5% of system revenues for the three
months ended June 30, 1996 to 45.3% of system revenues for the three months
ended June 30, 1997 and increased from 47.9% of system revenues for the six
months ended June 30, 1996 to 58.0% of system revenues for the six months ended
June 30, 1997. The decrease in cost of system revenues as a percentage of
system revenues for the three month period ended June 30, 1997, resulted from
the sale of higher margin systems in South America partially offset by
increased expenditures for personnel and overhead to support the increasing
sales volumes and the expansion of the Company's manufacturing and assembly
operations. The increase in cost of system revenues as a percentage of system
revenues for the six month period ended June 30, 1997 reflects the lower
margins generated from the sale of systems in the first quarter of 1997 to
continue the expansion of a prepaid wireless system in Mexico and, to a lesser
extent, the full six months of operations of the systems division.
Engineering, research and development expenses
- ----------------------------------------------
Engineering, research and development expenses include primarily the salaries
and benefits for software development and engineering personnel associated with
the development, implementation and maintenance of existing and new services.
Engineering, research and development expenses increased $424,000 or 57.0% from
the three months ended June 30, 1996 to the three months ended June 30, 1997 and
increased $1.0 million or 88.9% from the six months ended June 30, 1996 to the
six months ended June 30, 1997. The increases were principally due to the costs
associated with the Company's hiring of new personnel to support the
development, implementation and deployment of the C2C Network and, to a lesser
extent, additional personnel to support the expansion of teleservices.
Engineering, research and development expenses are expected to increase in 1997
as additional personnel are added to support the growth of the C2C Network.
Sales and marketing expenses
- ----------------------------
Sales and marketing expenses include direct sales force salaries and
commissions, travel expenses, and the cost of trade shows, advertising and other
promotional expenses. Sales and marketing expenses increased $592,000 or 92.8%
from the three months ended June 30, 1996 to the three months ended June 30,
1997 and increased $1.1 million or 91.7% from the six months ended June 30, 1996
to the six months ended June 30, 1997. The increase in sales and marketing
expenses was due to additional salaries, benefits and other expenditures to
support the more sales intensive prepaid wireless service business and
concentrated sales and marketing efforts related to teleservices. In addition,
the acquisitions of Voice Systems Technology, Inc. (VST) and Wireless Americas
Corp. (WAC) in 1996 resulted in the Company incurring increased expenditures to
support system sales globally.
General and administrative expenses
- -----------------------------------
General and administrative expenses include salaries, benefits and other
expenses that provide administrative support to the Company. General and
administrative expenses and related party management fees increased $203,000 or
32.7% from the three months ended June 30, 1996 to the three months ended June
30, 1997. For the six months ended June 30, 1997 general and administrative
expenses increased $118,000 or 8.7% from the same period in the prior year. The
increases resulted principally from the addition of staff to support the growth
of the Company's operations and to a lesser extent, the costs associated with
being a publicly traded company.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - June 30, 1996 and 1997 (continued)
- ----------------------------------------------------------
Depreciation and amortization expenses
- --------------------------------------
Depreciation and amortization expenses include depreciation of
telecommunications systems, furniture and equipment, leasehold improvements and
goodwill. The Company provides for depreciation using the straight-line method
over the estimated useful lives of the assets, which range from three to seven
years. Goodwill related to the acquisitions of VST and WAC is being amortized
over eight years. Depreciation and amortization expenses increased $726,000 or
152.2% and $1.3 million or 162.5%, respectively during the three and six month
periods ended June 30, 1997 compared to the same periods in the prior year. The
increases were due primarily to amortization of goodwill from the Company's two
acquisitions and depreciation of additional telecommunications equipment and
software to support the Company's roaming services, teleservices and prepaid
wireless services. In addition, the expansion of the Company's call centers and
system assembly facility resulted in increased depreciation of furniture and
equipment and leasehold improvements. Depreciation and amortization expenses are
expected to continue to increase due to a full year of goodwill amortization
from the VST and WAC acquisitions and increased depreciation of
telecommunications systems associated with teleservices and the expansion of the
C2C Network.
Interest income(expense), net
- -----------------------------
Interest income (expense), net increased $210,000 and $478,000, respectively for
the three and six month periods ended June 30, 1997 as compared to the same
periods in the prior year. The increases resulted primarily from interest earned
on the short term investments from the net proceeds of the Company's initial
public offering in June 1996.
Provision for income taxes
- --------------------------
The Company's effective income tax rate for the three and six month periods
ended June 30, 1997 reflects an increase from the prior year due to the non-
deductibility of goodwill amortization from the acquisitions of VST and WAC.
The effective income tax rate is expected to continue to be greater than 40% for
the remainder of 1997 due to the impact of non-deductible goodwill.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997 the Company had cash, cash equivalents and short term
investments of $3.8 million as compared to $21.4 million at December 31, 1996.
The decrease is primarily
attributable to sale of short term investments to finance purchases of
telecommunications equipment to facilitate the expansion of the C2C Network and
teleservices business.
Net cash used in operating activities for the six months ended June 30, 1997 was
$2.0 million and resulted from an increase of accounts receivable and inventory
partially offset by an increase in accounts payable and accrued expenses.
Accounts receivable increased due to the sale of systems to Latin and South
America. Inventory increased to support the increasing sales of systems.
Accounts payable and accrued expenses increased as a result of increases in
capital expenditures and costs associated with the overall growth of the
Company.
Net cash provided by investing activities was $1.2 million for the six months
ended June 30, 1997 which consisted primarily of $17.5 million from sales of
short-term investments, offset by capital expenditures of $16.3 million for the
purchase of telecommunications equipment to support the Company's C2C Network
and the expansion of the teleservices business.
Net cash provided by financing activities for the six months ended June 30, 1997
was $753,000, primarily from the exercise of employee stock options.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - June 30, 1996 and 1997 (continued)
- ----------------------------------------------------------
Liquidity and Capital Resources (continued)
- -------------------------------------------
In July 1997, the Company entered into a Master Equipment Lease Agreement to
finance $5.5 million of telecommunications equipment to expand and enhance its
teleservices and prepaid wireless service businesses. The lease is a line of
credit, payable on demand, bearing interest at LIBOR plus one percent. Once the
equipment has been fully financed the lease will be converted into a three year
lease, payable in equal monthly installments at an interest rate of
approximately 8.5% per annum.
In July 1997, the Company filed a registration statement with the Securities and
Exchange Commission for an offering of 3 million shares of common stock of which
2,775,000 shares are to be sold by the Company and 225,000 shares are to be sold
by the selling shareholders. The net proceeds are to be used for capital and
other expenditures in connection with the expansion of the C2C Network and to
purchase the remaining 20% interest in WAC. The Company expects to use the
balance of the net proceeds for general corporate purposes, including working
capital. A portion of the net proceeds may also be used for the acquisition of
businesses, products and technology that are complementary to those of the
Company. The Company currently has no plans, commitments or negotiations with
respect to any such transactions. Pending such uses, the Company intends to
invest the net proceeds in short term, interest bearing, investment grade
securities.
The Company believes that the net proceeds from the anticipated offering,
together with existing cash balances and funds anticipated to be generated from
operations, will be sufficient to finance the Company's operations and the
expansion of the C2C Network for at least the next 18 months.
10
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. A number of uncertainties
exist that could affect the Company's future operating results, including,
without limitation, technological changes in the Company's industry, the ability
of the Company to continue to develop and successfully deploy its C2C Network,
the Company's ability to retain existing customers and attract new customers,
increased competition and general economic factors.
Historically, a significant portion of the Company's revenues in any particular
period has been attributable to a limited number of customers. This
concentration of customers can cause the Company's revenues and earnings to
fluctuate from quarter to quarter, based on the volume of call traffic generated
through these customers, the services being performed pursuant to teleservice
programs or the level of system sales. A significant decrease in business from
any of the Company's major customers, including a decrease in business due to
factors outside of the Company's control, would have a materially adverse effect
on the Company's business, financial condition and results of operations.
The Company has experienced fluctuations in its quarterly operating results and
anticipates that such fluctuations will continue and could intensify. The
Company experienced a significant reduction in its profitability in 1996 and an
operating loss in the first six months of 1997, due to expenses associated with
the development of its C2C Network. The Company's quarterly operating results
may vary significantly depending on a number of factors, including the timing of
the introduction or acceptance of new services offered by the Company or its
competitors, changes in the mix of services provided by the Company, variations
in the level of system sales, changes in regulations affecting the wireless
industry, changes in the Company's operating expenses, personnel changes and
general economic conditions. Due to all of the foregoing factors, it is
possible that in some future quarter the Company's results of operations will be
below prior results or the expectations of public market analysts and investors.
In such event, the price of the Company's Common Stock would likely be
materially and adversely affected.
The Company historically has provided all of its services to cellular carriers.
Although the cellular market has experienced significant growth in recent years,
there can be no assurance that such growth will continue at similar rates, or at
all, or that cellular carriers will continue to use the Company's services. In
addition, the prepaid wireless service and PCS markets are in their initial
stages of development, and if these markets do not grow as expected or if the
carriers in these markets do not use the Company's services, the Company's
business, financial condition and results of operations could be materially and
adversely affected.
The Company's future success depends, in large part, on the continued use of its
existing services and systems, the acceptance of new services in the wireless
industry and the Company's ability to develop services and systems that keep
pace with changes in the wireless telephone industry. Further, a rapid shift
away from the use of cellular in favor of other services could affect demand for
the Company's service offerings and could require the Company to develop
modified or alternative service offerings addressing the particular needs of
providers of such new services. There can be no assurance that the Company will
be successful in developing or marketing its existing or future service
offerings or systems in a timely manner, or at all.
The Company is currently devoting significant resources toward the continued
development and deployment of its prepaid wireless service or systems, including
continued expansion of its C2C Network. There can be no assurance that the
Company will continue to successfully complete the expansion of the C2C Network
or its prepaid wireless service in a timely fashion, that the market for the
Company's prepaid wireless service and systems will continue to develop, that
existing or pending contracts will be implemented as expected or that the
Company's C2C Network will continue to operate successfully.
11
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Recently, the Company has expanded its operations rapidly, which has created
significant demands on the Company's administrative, operational, development
and financial personnel and other resources. Additional expansion by the
Company may further strain the Company's management, financial and other
resources. There can be no assurance that the Company's systems, procedures,
controls and existing space will be adequate to support expansion of the
Company's operations. If the Company's management is unable to manage growth
effectively, the quality of the Company's services, its ability to retain key
personnel and its business, financial condition and results of operations could
be materially and adversely affected.
The market for services to wireless carriers is highly competitive and subject
to rapid change. A number of companies currently offer one or more of the
services offered by the Company. In addition, wireless carriers are providing
or can provide, in-house, the services that the Company offers. In addition,
the Company anticipates continued growth and competition in the wireless carrier
services industry and consequently, the entrance of new competitors in the
future. An increase in competition could result in price reductions and loss of
market share. Any resulting reduction in gross margins could have a material
adverse effect on the Company's business, financial condition or results of
operations.
The Company's success and ability to compete is dependent in part upon its
proprietary technology. If unauthorized copying or misuse of the Company's
technology were to occur to any substantial degree, the Company's business,
financial condition and results of operations could be materially adversely
affected. In addition, some of the software used to support the Company's
roaming services and prepaid wireless services and systems is licensed by the
Company from single vendors, which are small corporations. There can be no
assurance that these suppliers will continue to license this software to the
Company or, if any supplier terminates its agreement with the Company, that the
Company will be able to develop or otherwise procure software from another
supplier on a timely basis and at commercially acceptable prices.
The Company's operations are dependent on its ability to maintain its computer,
switching and other telecommunications equipment and systems in effective
working order and to protect its systems against damage from fire, natural
disaster, power loss, telecommunications failure or similar events. Any damage,
failure or delay that causes interruptions in the Company's operations could
have a materially adverse effect on the Company's business, financial condition
and results of operations.
12
<PAGE>
PART II. OTHER INFORMATION:
- ----------------------------
Item 1. Legal Proceedings
In April 1997, the former President of Wireless Americas Corp. ("WAC")
filed suit against the Company and its 80% subsidiary, WAC, in the Circuit
Court for Dade County, Florida. The plaintiff owns the remaining 20% of
WAC. The suit relates to WAC's termination of the plaintiff's employment in
March 1997, pursuant to an employment contract that was set to expire in
1998, and relates to certain rights which the plaintiff may have to require
the Company to purchase his 20% interest in WAC. The plaintiff claimed the
purchase price for his 20% interest was in excess of $2.8 million. The
Company and the plaintiff have agreed in principle to settle all of the
claims asserted by the plaintiff. The terms of the agreement in principle
require the Company to buy the plaintiff's 20% interest in WAC for a
purchase price of $1.3 million. The parties will also exchange full mutual
releases and expect to negotiate and execute other customary documents
associated with the settlement of litigation. The settlement of the suit is
conditioned on the completion of definitive documentation. There can be no
assurance that the proposed settlement will be finalized in accordance with
the proposed terms.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held the 1997 Annual Meeting of Shareholders (the "Annual
Meeting") on May 22, 1997. At the Annual Meeting, the following actions were
taken :
1. The shareholders elected Craig L. Burr and Gerald Segel as Class I
Directors of the Company to serve for a three year term. Holders of
12,315,470 shares and 12,312,670 shares of Common Stock voted for
Messrs. Burr and Segel, respectively; and
2. The shareholders ratified the appointment of Ernst & Young LLP as the
Company's independent auditors by a vote of 12,318,267 shares of Common
Stock for, 4,850 shares of Common Stock against and 11,820 shares of
Common Stock not voting.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The exhibits listed in the Exhibit Index are part of or included
in this report.
b) Reports on Form 8-K
NONE
13
<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.
Boston Communications Group, Inc.
---------------------------------
(Registrant)
Date: August 8, 1997 By: /s/ Paul J. Tobin
------------------
Paul J. Tobin
Chief Executive Officer
and President
Date: August 8, 1997 By: /s/ Fritz von Mering
---------------------
Fritz von Mering
Vice President, Finance
and Administration
14
<PAGE>
BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED June 30, 1997
INDEX TO EXHIBITS
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Exhibit No. Description
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10.34 Commercial Lease dated April 1 ,1997 between the Company and
Cummings Properties Management, Inc.
11 Statement RE: Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.34
CUMMINGS PROPERTIES MANAGEMENT, INC.
STANDARD FORM
COMMERCIAL LEASE
In consideration of the covenants herein contained, Cummings Properties
Management, Inc., hereinafter called LESSOR, does hereby lease to Boston
Communications Group, Inc. (a MA corp.)
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hereinafter called LESSEE, the following described premises, hereinafter called
the leased premises: approximately 4,793 square feet (including 3.25% common
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area) at 100 Sylvan Road, Suite G300, Woburn, MA 01801
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TO HAVE AND HOLD the leased premises for a term of five (5) years commencing
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at noon on April 1, 1997 and ending at noon on March 30, 2002 unless sooner
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terminated as herein provided. LESSOR and LESSEE now covenant and agree that
the following terms and conditions shall govern this lease during the term
hereof and for such further time as LESSEE shall hold the leased premises.
1. RENT. LESSEE shall pay to LESSOR base rent at the rate of fifty eight
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thousand six hundred sixty six (58,666.00) U.S. dollars per year drawn on a U.S.
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bank, payable in advance in monthly installments of $4,888.83 on the first day
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in each calendar month in advance, the first monthly payment to be made upon
LESSEE's execution of this lease, including payment in advance of appropriate
fractions of a monthly payment for any portion of a month at the commencement or
end of said lease term. All payments shall be made to LESSOR or agent at 200
West Cummings Park, Woburn, Massachusetts 01801, or at such other place as
LESSOR shall from time to time in writing designate. If the "Cost of Living" has
increased as shown by the Consumer Price Index (Boston, Massachusetts, all
items, all urban consumers), U.S. Bureau of Labor Statistics, the amount of base
rent due during each calendar year of this lease and any extensions thereof
shall be annually adjusted in proportion to any increase in the Index. All such
adjustments shall take place with the rent due on January 1 of each year during
the lease term. The base month from which to determine the amount of each
increase in the Index shall be January 1997, which figure shall be compared with
----
the figure for November 1997, and each November thereafter to determine the
----
percentage increase (if any) in the base rent to be paid during the following
calendar year. In the event that the Consumer Price Index as presently computed
is discontinued as a measure of "Cost of Living" changes, any adjustment shall
then be made on the basis of a comparable index then in general use.
2. SECURITY DEPOSIT. LESSEE shall pay to LESSOR a security deposit in the
amount of nine thousand eight hundred (9,800.00) dollars upon the execution of
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this lease by LESSEE, which shall be held as security for LESSEE's performance
as herein provided and refunded to LESSEE without interest at the end of this
lease, subject to LESSEE's satisfactory compliance with the conditions hereof.
LESSEE may not apply the security deposit to payment of the last month's rent.
In the event of any default or breach of this lease by LESSEE, LESSOR shall
immediately apply the security deposit first to any unamortized improvements
completed for LESSEE's occupancy, then to offset any outstanding invoice or
other payment due to LESSOR, with the balance applied to outstanding rent. If
all or any portion of the security deposit is applied to cure a default or
breach during the term of the lease, LESSEE shall be responsible for restoring
said deposit forthwith, and failure to do so shall be considered a substantial
default under the lease. LESSEE's failure to remit the full security deposit or
any portion thereof when due shall also constitute a substantial lease default.
3. USE OF PREMISES. LESSEE shall use the leased premises only for the
purpose of executive and administrative offices.
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4. ADDITIONAL RENT. LESSEE shall pay to LESSOR as additional rent a
proportionate share (based on square footage leased by LESSEE as compared with
the total leaseable square footage of the building of which the leased premises
are a part) of any increase in the real estate taxes levied against the land and
building of which the leased premises are a part (hereinafter called the
building), whether such increase is caused by an increase in the tax rate, or
the assessment on the property, or a change in the method of determining real
estate taxes. LESSEE shall make payment within thirty (30) days of written
notice from LESSOR that such increased taxes are payable, and any additional
rent shall be prorated should the lease terminate before the end of any tax
year. The base from which to determine the amount of any increase in taxes
shall be the rate and the assessment in effect as of July 1, 1996. In the event
----
that the building was not assessed as a completed structure as of the
aforementioned date, then the base assessment shall be as of the first date when
the building is assessed as a completed structure.
5. UTILITIES. LESSOR shall provide equipment per LESSOR'S building
standard specifications to heat the leased premises in season and to cool all
office areas between May 1 and November 1. LESSEE shall pay all charges for
utilities used on the leased premises, including electricity, gas, oil, water
and sewer. LESSEE shall pay the utility provider or LESSOR, as applicable, for
all such utility charges as determined either by separate meters serving the
leased premises or as a proportionate share of the utility charges for the
building if not separately metered. LESSEE shall also pay LESSOR a proportionate
share of any other fees and charges relating in any way to utility use at the
building. No plumbing, construction or electrical work of any type shall be done
without LESSOR's prior written approval and LESSEE obtaining the appropriate
municipal permit.
6. COMPLIANCE WITH LAWS. LESSEE acknowledges that no trade, occupation,
activity or work shall be conducted in the leased premises or use made thereof
which may be unlawful, improper, noisy, offensive, or contrary to any applicable
statute, regulation, ordinance or bylaw. LESSEE shall keep all employees
working in the leased premises covered by Worker's Compensation Insurance and
shall obtain any licenses and permits necessary for LESSEE's occupancy. LESSEE
shall be responsible for causing the leased premises and any alterations by
LESSEE which are allowed hereunder to be in full compliance with any applicable
statute, regulation, ordinance or bylaw.
7. FIRE, CASUALTY, EMINENT DOMAIN. Should a substantial portion of the
leased premises, or of the property of which they are a part, be substantially
damaged by fire or other casualty, or be taken by eminent domain, LESSOR may
elect to terminate this lease. When such fire, casualty, or taking renders the
leased premises substantially unsuitable for their intended use, a just and
proportionate abatement of rent shall be made, and LESSEE may elect to
terminate this lease if: (a) LESSOR fails to give written notice within thirty
(30) days of intention to restore the leased premises, or (b) LESSOR fails to
restore the leased premises to a condition substantially suitable for their
intended use within ninety (90) days of said fire, casualty or taking. LESSOR
reserves all rights for damages or injury to the leased premises for any taking
by eminent domain, except for damage to LESSEE's property or equipment.
8. FIRE INSURANCE. LESSEE shall not permit any use of the leased premises
which will adversely affect or make voidable any insurance on the property of
which the leased premises are a part, or on the contents of said property, or
which shall be contrary to any law or regulation from time to time established
by the Insurance Services Office (or successor), local Fire Department, LESSOR's
insurer, or any similar body. LESSEE shall on demand reimburse LESSOR, and all
other tenants, all extra Insurance premiums caused by LESSEE's use of the leased
premises. LESSEE shall not vacate the leased premises or permit same to be
unoccupied other than during LESSEE's customary non-business days or hours.
<PAGE>
9. MAINTENANCE OF PREMISES. LESSOR will be responsible for all structural
maintenance of the leased premises and for the normal daytime maintenance of all
space heating and cooling equipment, sprinklers, doors, locks, plumbing, and
electrical wiring, but specifically excluding damage caused by the careless,
malicious, willful, or negligent acts of LESSEE or others, chemical, water or
corrosion damage from any source, and maintenance of any non "building standard"
leasehold improvements. LESSEE agrees to maintain at its expense all other
aspects of the leased premises in the same condition as they are at the
commencement of the term or as they may be put in during the term of this lease,
normal wear and tear and damage by fire or other casualty only excepted, and
whenever necessary, to replace light bulbs, plate glass and other glass therein,
acknowledging that the leased premises are now in good order and the light bulbs
and glass whole. LESSEE will properly control or vent all solvents, degreasers,
smoke, odors, etc. and shall not cause the area surrounding the leased premises
to be in anything other than a neat and clean condition, depositing all waste in
appropriate receptacles. LESSEE shall be solely responsible for any damage to
plumbing equipment, sanitary lines, or any other portion of the building which
results from the discharge or use of any acid or corrosive substance by LESSEE.
LESSEE shall not permit the leased premises to be overloaded, damaged, stripped
or defaced, nor suffer any waste, and will not keep animals within the leased
premises. If the leased premises include any wooden mezzanine type space, the
floor capacity of such space is suitable only for office use, light storage or
assembly work. LESSEE shall protect any carpet with plastic or masonite chair
pads under any rolling chairs. Unless heat is provided at LESSOR's expense,
LESSEE shall maintain sufficient heat to prevent freezing of pipes or other
damage. Any increase in air conditioning equipment or electrical capacity, or
any installation and/or maintenance of equipment which is necessitated by some
specific aspect of LESSEE's use of the leased premises shall be at LESSEE's
expense. All maintenance provided by LESSOR shall be during LESSOR's normal
business hours.
10. ALTERATIONS. LESSEE shall not make structural alterations or additions of
any kind to the leased premises, but may make nonstructural alterations provided
LESSOR consents thereto in writing. All such allowed alterations shall be at
LESSEE's expense and shall conform with LESSOR's construction specifications. If
LESSOR or LESSOR's agent provides any services or maintenance for LESSEE in
connection with such alterations or otherwise under this lease, any just invoice
will be promptly paid. LESSEE shall not permit any mechanics' liens, or similar
liens, to remain upon the leased premises in connection with work of any
character performed or claimed to have been performed at the direction of LESSEE
and shall cause any such lien to be released or removed forthwith without cost
to LESSOR. Any alterations or additions shall become part of the leased premises
and the property of LESSOR. Any alterations completed by LESSOR shall be
LESSOR's "building standard" unless noted otherwise. LESSOR shall have the right
at any time to change the arrangement of parking areas, stairs, walkways or
other common areas of the building.
11. ASSIGNMENT OR SUBLEASING. LESSEE shall not assign this lease or sublet or
allow any other firm or individual to occupy the whole or any part of the leased
premises without LESSOR's prior written consent. Notwithstanding such assignment
or subleasing, LESSEE and GUARANTOR shall remain liable to LESSOR for the
payment of all rent and for the full performance of the covenants and conditions
of this lease. LESSEE shall pay LESSOR promptly for legal and administrative
expenses incurred by LESSOR in connection with any consent requested hereunder
by LESSEE.
12. SUBORDINATION. This lease shall be subject and subordinate to any and all
mortgages and other instruments in the nature of a mortgage, now or at any time
hereafter, and LESSEE shall, when requested, promptly execute and deliver such
written instruments as shall be necessary to show the subordination of this
lease to said mortgages or other such instruments in the nature of a mortgage.
13. LESSOR'S ACCESS. LESSOR or agents of LESSOR may at any reasonable time
enter to view the leased premises, to make repairs and alterations as LESSOR
should elect to do for the leased premises, the common areas or any other
portions of the building, to make repairs which LESSEE is required but has
failed to do, and to show the leased premises to others.
14. SNOW REMOVAL. The plowing of snow from all roadways and unobstructed
parking areas shall be at the sole expense of LESSOR. The control of snow and
ice on all walkways, steps and loading areas serving the leased premises and all
other areas not readily accessible to plows shall be the sole responsibility of
LESSEE. Notwithstanding the foregoing, however, LESSEE shall hold LESSOR and
OWNER harmless from any and all claims by LESSEE's agents, representatives,
employees, callers or invitees for damage or personal injury resulting in any
way from snow or ice on any area serving the leased premises.
15. ACCESS AND PARKING. LESSEE shall have the right without additional charge
to use parking facilities provided for the leased premises in common with others
entitled to the use thereof. Said parking areas plus any stairs, walkways,
elevators or other common areas shall in all cases be considered a part of the
leased premises when they are used by LESSEE or LESSEE's employees, agents,
callers or invitees. LESSEE will not obstruct in any manner any portion of the
building or the walkways or approaches to the building, and will conform to all
rules and regulations now or hereafter made by LESSOR for parking, and for the
care, use, or alteration of the building, its facilities and approaches. LESSEE
further warrants that LESSEE will not permit any employee or visitor to violate
this or any covenant or obligation of LESSEE. No unattended parking will be
permitted between 7:00 PM and 7:00 AM without LESSOR's prior written approval,
and from December 1 through March 31 annually, such parking shall be permitted
only in those areas specifically designated for assigned overnight parking.
Unregistered or disabled vehicles, or storage trailers of any type, may not be
parked at any time. LESSOR may tow, at LESSEE's sole risk and expense, any
misparked vehicle belonging to LESSEE or LESSEE's agents, employees, invitees or
callers, at any time. LESSOR shall not be responsible for providing any security
services for the leased premises.
16. LIABILITY. LESSEE shall be solely responsible as between LESSOR and
LESSEE for deaths or personal injuries to all persons whomsoever occurring in or
on the leased premises (including any common areas that are considered part of
the leased premises hereunder) from whatever cause arising, and damage to
property to whomsoever belonging arising out of the use, control, condition or
occupation of the leased premises by LESSEE; and LESSEE agrees to indemnify and
save harmless LESSOR and OWNER from any and all liability, including but not
limited to costs, expenses, damages, causes of action, claims, judgments and
attorney's fees caused by or in any way growing out of any matters aforesaid,
except for death, personal injuries or property damage directly resulting from
the sole negligence of LESSOR.
17. INSURANCE. LESSEE will secure and carry at its own expense a commercial
general liability policy insuring LESSEE, LESSOR and OWNER against any claims
based on bodily injury (including death) or property damage arising out of the
condition of the leased premises (including any common areas that are considered
part of the leased premises hereunder) or their use by LESSEE, such policy to
insure LESSEE, LESSOR and OWNER against any claim up to One Million (1,000,000)
Dollars in the case of any one accident involving bodily injury (including
death), and up to One Million (1,000,000) Dollars against any claim for damage
to property. LESSOR and OWNER shall be included in each such policy as
additional insureds using ISO Form CG 20 11 85 or some other form approved by
LESSOR. LESSEE will file with LESSOR prior to occupancy certificates and any
applicable riders or endorsements showing that such insurance is in force, and
thereafter will file renewal certificates prior to the expiration of any such
policies. All such insurance certificates shall provide that such policies shall
not be cancelled without at least ten (10) days prior written notice to each
insured. In the event LESSEE shall fail to provide or maintain such insurance at
any time during the term of this lease, then LESSOR may elect to contract for
such insurance at LESSEE's expense.
18. SIGNS. LESSOR authorizes, and LESSEE at LESSEE's expense agrees to erect,
signage for the leased premises in accordance with LESSOR's building standards
for style, size, location, etc. LESSEE shall obtain the prior written consent of
LESSOR before erecting any sign on the leased premises, which consent shall
include approval as to size, wording, design and location. LESSOR may remove and
dispose of any sign not approved, erected or displayed in conformance with this
lease.
19. BROKERAGE. LESSEE warrants and represents to LESSOR that LESSEE has dealt
with no broker or third person with respect to this lease, and LESSEE agrees to
indemnify LESSOR against any brokerage claims arising by virtue of this lease.
LESSOR warrants and represents to LESSEE that LESSOR has employed no exclusive
broker or agent in connection with the letting of the leased premises.
<PAGE>
20. DEFAULT AND ACCELERATION OF RENT. In the event that; (a) any assignment
for the benefit of creditors, trust mortgage, receivership or other insolvency
proceeding shall be made or instituted with respect to LESSEE or LESSEE's
property; (b) LESSEE shall default in the observance or performance of any of
LESSEE's covenants, agreements, or obligations hereunder, other than substantial
monetary payments as provided below, and such default shall not be corrected
within ten (10) days after written notice thereof; or (c) LESSEE vacates the
leased premises, them LESSOR shall have the right thereafter, while such default
continues and without demand or further notice, to re-enter and take possession
of the leased premises, to declare the term of this lease ended, and to remove
LESSEE's effects, without being guilty of any manner of trespass, and without
prejudice to any remedies which might be otherwise used for arrears of rent or
other default or breach of the lease. If LESSEE shall default in the payment of
the security deposit, rent, taxes, substantial invoice from LESSOR or LESSOR's
agent for goods and/or services or other sum herein specified, and such default
shall continue for ten (10) days after written notice thereof, and, because both
parties agree that nonpayment of said sums when due is a substantial breach of
the lease, and, because the payment of rent in monthly installments is for the
sole benefit and convenience of LESSEE, then in addition to the foregoing
remedies the entire balance of rent which is due hereunder shall become
immediately due and payable as liquidated damages. LESSOR, without being under
any obligation to do so and without thereby waiving any default, may remedy same
for the account and at the expense of LESSEE. If LESSOR pays or incurs any
obligations for the payment of money in connection therewith, such sums paid or
obligations incurred plus interest and costs, shall be paid to LESSOR by LESSEE
as additional rent. Any sums received by LESSOR from or on behalf of LESSEE at
any time shall be applied first to any unamortized improvements completed for
LESSEE's occupancy, then to offset any outstanding invoice or other payment due
to LESSOR, with the balance applied to outstanding rent. LESSEE agrees to pay
reasonable attorney's fees and/or administrative costs incurred by LESSOR in
enforcing any or all obligations of LESSEE under this lease at any time. LESSEE
shall pay LESSOR interest at the rate of eighteen (18) percent per annum on any
payment from LESSEE to LESSOR which is past due.
21. NOTICE. Any notice from LESSOR to LESSEE relating to the leased premises
or to the occupancy thereof shall be deemed duly served when left at the leased
premises addressed to LESSEE, or served by constable, or sent to the leased
premises by certified mail, return receipt requested, postage prepaid, addressed
to LESSEE. Any notice from LESSEE to LESSOR relating to the leased premises or
to the occupancy thereof shall be deemed duly served when served by constable,
or delivered to LESSOR by certified mail, return receipt requested, postage
prepaid, addressed to LESSOR at 200 West Cummings Park, Woburn, MA 01801 or at
LESSOR's last designated address. No oral notice or representation shall have
any force or effect. Time is of the essence in service of any notice.
22. OCCUPANCY. In the event that LESSEE takes possession of said leased
premises prior to the start of said term, LESSEE will perform and observe all of
LESSEE's covenants from the date upon which LESSEE takes possession except the
obligation for the payment of extra rent for any period of less than one month.
LESSEE shall not remove LESSEE's goods or property from the leased premises
other than in the ordinary and usual course of business, without having first
paid and satisfied LESSOR for all rent which may become due during the entire
term of this lease. LESSOR shall have the right to relocate LESSEE to another
facility upon prior written notice to LESSEE and on terms comparable to those
herein. In the event that LESSEE continues to occupy or control all or any part
of the leased premises after the agreed termination of this lease without the
written permission of LESSOR, then LESSEE shall be liable to LESSOR for any and
all loss, damages or expenses incurred by LESSOR, and all other terms of this
lease shall continue to apply except that rent shall be due in full monthly
installments at a rate of one hundred fifty (150) percent of that which would
otherwise be due under this lease, it being understood between the parties that
such extended occupancy is as a tenant st sufferance and is solely for the
benefit and convenience of LESSEE and as such has greater rental value. LESSEE's
control or occupancy of all or any part of the leased premises beyond noon on
the last day of any monthly rental period shall constitute LESSEE's occupancy
for an entire additional month, and increased rent as provided in this section
shall be due and payable immediately in advance. LESSOR's acceptance of any
payments from LESSEE during such extended occupancy shall not alter LESSEE's
status as a tenant at sufferance.
23. FIRE PREVENTION. LESSEE agrees to use every reasonable precaution against
fire and agrees to provide and maintain approved, labeled fire extinguishers,
emergency lighting equipment, and exit signs and complete any other
modifications within the leased premises as required or recommended by the
Insurance Services Office (or successor organization), OSHA, the local Fire
Department, or any similar body.
24. OUTSIDE AREA. No goods, equipment, or things of any type or description
shall be held or stored outside the leased premises at any time without prior
written consent from LESSOR. Any goods, equipment or things left outside the
leased premises without LESSOR's prior written consent shall be deemed abandoned
and may be removed at LESSEE's expense without notice by LESSOR. LESSEE shall
have a building standard size dumpster, in a location approved by LESSOR,
provided and serviced at LESSEE's expense by whichever disposal firm may from
time to time be designated by LESSOR, unless a shared dumpster or compactor is
provided by LESSOR, in which case LESSEE shall pay its proportionate share of
any costs associated therewith.
25. ENVIRONMENT. LESSEE will so conduct and operate the leased premises as not
to interfere in any way with the use and enjoyment of other portions of the same
or neighboring buildings by others by reason of odors, smoke, smells, noise,
pets, accumulation of garbage or trash, vermin or other pests, or otherwise, and
will at its expense employ a professional pest control service if necessary.
LESSEE agrees to maintain efficient and effective devices for preventing damage
to heating equipment from solvents, degreasers, cutting oils, propellants, etc.
which may be present at the leased premises. No hazardous materials or wastes
shall be stored, disposed of, or allowed to remain at the leased premises at any
time, and LESSEE shall be solely responsible for any and all corrosion or other
damage associated with the use, storage and/or disposal of same by LESSEE.
26. RESPONSIBILITY. Neither LESSOR nor OWNER shall be held liable to anyone
for loss or damage caused in any way by the use, leakage, seepage or escape of
water from any source, or for the cessation of any service rendered customarily
to said premises or buildings, or agreed to by the terms of this lease, due to
any accident, the making of repairs, alterations or improvements, labor
difficulties, weather conditions, mechanical breakdowns, trouble or scarcity in
obtaining fuel, electricity, service or supplies from the sources from which
they are usually obtained for said building, or any cause beyond LESSOR's
immediate control.
27. SURRENDER. LESSEE shall at the termination of this lease remove all of
LESSEE's goods and effects from the leased premises. LESSEE shall deliver to
LESSOR the leased premises and all keys and locks thereto, all fixtures and
equipment connected therewith, and all alterations, additions and improvements
made to or upon the leased premises, whether completed by LESSEE, LESSOR or
others, including but not limited to any offices, partitions, window blinds,
floor coverings (including computer floors), plumbing fixtures, air conditioning
equipment and ductwork of any type, exhaust fans or heaters, water coolers,
burglar alarms, telephone wiring, telephone equipment, air or gas distribution
piping, compressors, overhead cranes, hoists, trolleys or conveyors, counters,
shelving or signs attached to walls or floors, all electrical work, including
but not limited to lighting fixtures of any type, wiring, conduit, EMT,
transformers, distribution panels, bus ducts, raceways, outlets and disconnects,
and furnishings or equipment which have been bolted, welded, nailed, screwed,
glued or otherwise attached to any wall, floor or ceiling, or which have been
directly wired to any portion of the electrical system or which have been
plumbed to the water supply, drainage or venting systems serving the leased
premises. LESSEE shall deliver the leased premises sanitized from any chemicals
or other contaminants, and broom clean and in the same condition as they were at
the commencement of this lease or any prior lease between the parties for the
leased premises, or as they were modified during said term with LESSOR's written
consent, reasonable wear and tear and damage by fire or other casualty only
excepted. In the event of LESSEE's failure to remove any of LESSEE's property
from the leased premises upon termination of the lease, LESSOR is hereby
authorized, without liability to LESSEE for loss or damage thereto, and at the
sole risk of LESSEE, to remove and store any such property at LESSEE's expense,
or to retain same under LESSOR's control, or to sell at public or private sale
(without notice), any or all of the property not so removed and to apply the net
proceeds of such sale to the payment of any sum due hereunder, or to destroy
such abandoned property. In no case shall the leased premises be deemed
surrendered to LESSOR until the termination date provided herein or such other
date as may be specified in a written agreement between the parties,
notwithstanding the delivery of any keys to LESSOR.
<PAGE>
28. GENERAL. (a) The invalidity or unenforceability of any provision of this
lease shall not affect or render invalid or unenforceable any other provision
hereof. (b) The obligations of this lease shall run with the land, and this
lease shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that LESSOR and OWNER shall be
liable only for obligations occurring while lessor, owner, or master lessee of
the premises. (c) Any action or proceeding arising out of the subject matter of
this lease shall be brought by LESSEE within one year after the cause of action
has occurred and only in a court of the Commonwealth of Massachusetts. (d) If
LESSOR is acting under or as agent for any trust or corporation, the obligations
of LESSOR shall be binding upon the trust or corporation, but not upon any
trustee, officer, director, shareholder, or beneficiary of the trust or
corporation individually. (e) If LESSOR is not the owner (OWNER) of the leased
premises, LESSOR represents that said OWNER has agreed to be bound by the terms
of this lease unless LESSEE is in default hereof. (f) This lease is made and
delivered in the Commonwealth of Massachusetts, and shall be interpreted,
construed, and enforced in accordance with the laws thereof. (g) This lease was
the result of negotiations between parties of equal bargaining strength, and
when executed by both parties shall constitute the entire agreement between said
parties. No other oral or written representation shall have any effect hereon,
and this agreement may not be altered, extended or amended except by written
agreement attached hereto or as otherwise provided herein. (h) Notwithstanding
any other statements herein, LESSOR makes no warranty, express or implied,
concerning the suitability of the leased premises for LESSEE's intended use. (i)
LESSEE agrees that if LESSOR does not deliver possession of the leased premises
as herein provided for any reason, LESSOR shall not be liable for any damages to
LESSEE for such failure, but LESSOR agrees to use reasonable efforts to deliver
possession to LESSEE at the earliest possible date, and a proportionate
abatement of rent for such time as LESSEE may be deprived of possession of said
leased premises shall be LESSEE's sole remedy. (j) Neither the submission of
this lease form, not the prospective acceptance of the security deposit and/or
rent shall constitute a reservation of or option for the leased premises, or an
offer to lease, it being expressly understood and agreed that this lease shall
not bind either party in any manner whatsoever until it has been executed by
both parties. (k) LESSEE shall not be entitled to exercise any option contained
herein, if LESSEE is in default of any terms or conditions hereof. (l) The
headings in this lease are for convenience only and shall not be considered part
of the terms hereof. (m) No endorsement by LESSEE on any check shall bind LESSOR
in any way.
29. SECURITY AGREEMENT. LESSEE hereby grants LESSOR a continuing security
interest in all existing or hereafter acquired property of LESSEE which is in
the lease premises to secure the payment of rent, the cost of leasehold
improvements, and the performance of any other obligations of LESSEE under this
lease. Default in the payment or performance of any of LESSEE's obligations
hereunder is a default under this security agreement, and shall entitle LESSOR
to immediately exercise all of the rights and remedies of a secured party under
the Uniform Commercial Code. LESSEE also agrees to execute a UCC-1 Financing
Statement and any other financing agreement required by LESSOR in connection
with this security interest.
30. WAIVERS, ETC. No consent or waiver, express or implied, by LESSOR, to or
of any breach of any covenant, condition or duty of LESSEE shall be construed as
a consent or waiver to or of any other breach of the same or any other covenant,
condition or duty. If LESSEE is several persons, several corporations or a
partnership, LESSEE's obligations are joint or partnership and also several.
Unless repugnant to the context, "LESSOR" and "LESSEE" mean the person or
persons, natural or corporate, named above as LESSOR and as LESSEE respectively,
and their respective heirs, executors, administrators, successors and assigns.
31. AUTOMATIC FIVE-YEAR EXTENSIONS. This lease, including all terms,
conditions, escalations, etc. shall be automatically extended for additional
successive periods of five (5) years each unless LESSOR or LESSEE shall serve
written notice, either party to the other, of either party's desire not to so
extend the lease. The time for serving such written notice shall be not more
than twelve (12) months or less than six (6) months prior to the expiration of
the then current lease period. Time is of the essence.
32. ADDITIONAL PROVISIONS. (Continued on attached rider(s) if necessary.)
- See Attached Rider -
IN WITNESS WHEREOF, LESSOR and LESSEE have hereunto set their hands and common
seals and intend to be legally bound hereby this 8th day of April, 1997.
<TABLE>
LESSOR: CUMMINGS PROPERTIES MANAGEMENT, INC. LESSEE: BOSTON COMMUNICATIONS GROUP, INC.
<S> <C>
BY: /s/ William S. Cummings By: /s/ Robert Sullivan
-------------------------------------- -----------------------------------------------
President Robert Sullivan
</TABLE>
GUARANTY
IN CONSIDERATION of the making of the above lease by Cummings Properties
Management, Inc. with Boston Communications Group, Inc.
----------------------------------------------------------
at the request of the undersigned and in reliance on this guaranty, the
undersigned (GUARANTOR) hereby personally guarantees the prompt payment of rent
by LESSEE and the performance by LESSEE of all terms, conditions, covenants and
agreements of the lease, any amendments thereto and any extensions or
assignments thereof, and the undersigned promises to pay all expenses, including
reasonable attorney's fees, incurred by LESSOR in enforcing all obligations of
LESSEE under the lease or incurred by LESSOR in enforcing this guaranty.
LESSOR's consent to any assignments, subleases, amendments and extensions by
LESSEE or to any compromise or release of LESSEE's liability hereunder, with or
without notice to the undersigned, or LESSOR's failure to notify the undersigned
of any default and/or reinstatement of the lease by LESSEE, shall not relieve
the undersigned from liability as GUARANTOR.
IN WITNESS WHEREOF, the undersigned GUARANTOR has hereunto set his/her/its
hand and common seal intending to be legally bound hereby this _____ day
of ______________, ______.
<PAGE>
CUMMINGS PROPERTIES MANAGEMENT, INC.
STANDARD FORM
RIDER TO LEASE
The following additional provisions are incorporated into and made a part of the
attached lease:
A. *LESSOR, at an expense incorporated entirely into the base rent and at no
further cost to LESSEE, shall construct standard office space according to
a mutually agreed upon plan attached hereto before or about the time LESSEE
takes possession of the leased premises. Said space shall be air
conditioned, carpeted and completed with painted drywall partitions,
acoustical tile ceilings, recessed lighting, chrome pendent fire protection
sprinklers, and 110V convenience electrical wall outlets at regular
intervals.
B. LESSOR, at LESSEE's expense of $15,000.00 to be paid by LESSEE upon
execution of this lease, shall construct an internal stairway at the
approximate location shown on the attached plan.
C. *LESSOR and LESSEE hereby waive any and all rights to a jury trial in any
summary process or eviction proceeding in any way arising out of the lease.
D. *LESSOR agrees to accept, and LESSEE agrees to make, payment of the monthly
rent as provided herein by way of an electronic fund transfer. The
provisions of Section 1 of the lease shall apply to such transfers in all
respects.
E. *LESSEE shall have access to the leased premises seven (7) days per week,
twenty-four (24) hours per day. LESSEE acknowledges and agrees that LESSOR
has no responsibility for providing any security services for the leased
premises, and LESSEE assumes any and all risks arising out of this
unlimited access provision.
F. *LESSEE shall have the right to assign this lease or sublet the leased
premises to an affiliated corporation, namely a corporation in which LESSEE
owns at least a fifty percent interest in LESSEE, which is under common
control with LESSEE, with which LESSEE merges, or which is formed as a
result of a merger or consolidation involving LESSEE, without further
consent from LESSOR, provided LESSEE serves LESSOR with prior written
notice to that effect. The provisions of Section 11 shall govern said
assignment in all other respects.
LESSOR: CUMMINGS PROPERTIES MANAGEMENT, INC. LESSEE: BOSTON COMMUNICATIONS
GROUP, INC.
By: /s/ W. S. Cummings By: /s/ ROBERT J. SULLIVAN
------------------------------------------ -----------------------------
President
Date: 4/8/97
----------------------------------------
5/93
<PAGE>
Exhibit 11
----------
BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended June 30, ended June 30,
1996 1997 1996 1997
---- ---- ---- ----
NET INCOME(LOSS) PER COMMON SHARE - PRIMARY
<S> <C> <C> <C> <C>
Net income(loss) $ (70) $ 43 $ 122 $ 136
====== ======= ====== =======
Primary income(loss) per share:
Average common shares outstanding 4,230 12,755 3,783 12,740
Dilutive options and warrants - 517 - 338
Other (1) 5,259 - 5,551 -
------ ------- ------ -------
Average common shares outstanding 9,489 13,272 9,334 13,078
====== ======= ====== =======
Net income(loss) per common share $(0.01) $ 0.00 $ 0.01 $ 0.01
====== ======= ====== =======
<CAPTION>
NET INCOME(LOSS) PER COMMON SHARE - FULL DILUTION
<S> <C> <C> <C> <C>
Net income(loss) $ (70) $ 43 $ 122 $ 136
====== ======= ====== =======
Fully diluted income(loss) per share:
Average common shares outstanding 4,230 12,755 3,783 12,740
Dilutive options and warrants - 894 - 526
Other (1) 5,259 - 5,551 -
------ ------- ------ -------
Average common shares outstanding 9,489 13,649 9,334 13,266
====== ======= ====== =======
Net income(loss) per common share $(0.01) $ 0.00 $ 0.01 $ 0.01
====== ======= ====== =======
</TABLE>
(1)Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, Common Stock and stock options issued during the twelve-month period
preceding the date of the initial filing of the registration statement with an
exercise price below the initial public offering price of $14.00 per share have
been included in the calculation of common equivalent shares, using the Treasury
stock method, as if they were outstanding for all periods presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 837 837
<SECURITIES> 2,962 2,962
<RECEIVABLES> 15,059 15,059
<ALLOWANCES> 1,279 1,279
<INVENTORY> 2,434 2,434
<CURRENT-ASSETS> 23,626 23,626
<PP&E> 27,381 27,381
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 54,382 54,382
<CURRENT-LIABILITIES> 10,600 10,600
<BONDS> 0 0
0 0
0 0
<COMMON> 129 129
<OTHER-SE> 43,653 43,653
<TOTAL-LIABILITY-AND-EQUITY> 54,382 54,382
<SALES> 16,353 31,972
<TOTAL-REVENUES> 16,353 31,972
<CGS> 11,977 24,036
<TOTAL-COSTS> 16,402 32,092
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (135) (397)
<INCOME-PRETAX> 86 277
<INCOME-TAX> 43 141
<INCOME-CONTINUING> 43 136
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 43 136
<EPS-PRIMARY> 0.00 0.01
<EPS-DILUTED> 0.00 0.01
</TABLE>
