-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RAPUbeVYTxtnfjmsebRkHay8Zjh7B/mFo7mCmCmO0Sgm61cqfgOQtle9F5mwJB7h lgCC2izf7oMFq0c0V4sQHA== 0000927016-97-002249.txt : 19970811 0000927016-97-002249.hdr.sgml : 19970811 ACCESSION NUMBER: 0000927016-97-002249 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON COMMUNICATIONS GROUP INC CENTRAL INDEX KEY: 0001012887 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 043026859 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28432 FILM NUMBER: 97654393 BUSINESS ADDRESS: STREET 1: ONE MCKINLEY SQUARE CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174763570 MAIL ADDRESS: STREET 1: ONE MCKINLEY SQ CITY: BOSTON STATE: MA ZIP: 02109 10-Q 1 FORM 10-Q 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 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 BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts)
ASSETS December 31, June 30, 1996 1997 ---- ---- 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 ====== ======
3 BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
Three months ended Six months ended June 30, June 30, 1996 1997 1996 1997 ---- ---- ---- ---- 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 ====== ====== ====== ======
4 BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Six months ended June 30, 1996 1997 ---- ---- 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 =====
5 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:
June 30, December 31, 1997 1996 ---- ---- Purchased parts $ 1,468 $ 984 Work-in-process 699 129 Finished goods 267 76 ----- ----- $ 2,434 $ 1,189 ===== =====
6 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 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 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 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 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 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 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 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 BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTER ENDED June 30, 1997 INDEX TO EXHIBITS ----------------- Exhibit No. Description - ----------- ----------- 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 EX-10.34 2 LEASE BETWEEN COMPANY & CUMMINGS PROPERTIES 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.) - -------------------------------------------------------------------------------- hereinafter called LESSEE, the following described premises, hereinafter called the leased premises: approximately 4,793 square feet (including 3.25% common ---------------------------------------------------------- area) at 100 Sylvan Road, Suite G300, Woburn, MA 01801 - -------------------------------------------------------------------------------- TO HAVE AND HOLD the leased premises for a term of five (5) years commencing ------------------ at noon on April 1, 1997 and ending at noon on March 30, 2002 unless sooner ----------------- ------------------ 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 ------------ thousand six hundred sixty six (58,666.00) U.S. dollars per year drawn on a U.S. - ------------------------------------------ bank, payable in advance in monthly installments of $4,888.83 on the first day --------- 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 -------------------------------------- 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. --------------------------------------------------------------------- 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. 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. 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. 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. LESSOR: CUMMINGS PROPERTIES MANAGEMENT, INC. LESSEE: BOSTON COMMUNICATIONS GROUP, INC. BY: /s/ William S. Cummings By: /s/ Robert Sullivan -------------------------------------- ----------------------------------------------- President Robert Sullivan
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 ______________, ______. 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 EX-11 3 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Exhibit 11 ---------- BOSTON COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (In thousands, except for per share data) (Unaudited)
Three months Six months ended June 30, ended June 30, 1996 1997 1996 1997 ---- ---- ---- ---- NET INCOME(LOSS) PER COMMON SHARE - PRIMARY 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 ====== ======= ====== ======= NET INCOME(LOSS) PER COMMON SHARE - FULL DILUTION 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 ====== ======= ====== =======
(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. EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 6-MOS DEC-31-1997 DEC-31-1997 APR-01-1997 JAN-01-1997 JUN-30-1997 JUN-30-1997 837 837 2,962 2,962 15,059 15,059 1,279 1,279 2,434 2,434 23,626 23,626 27,381 27,381 0 0 54,382 54,382 10,600 10,600 0 0 0 0 0 0 129 129 43,653 43,653 54,382 54,382 16,353 31,972 16,353 31,972 11,977 24,036 16,402 32,092 0 0 0 0 (135) (397) 86 277 43 141 43 136 0 0 0 0 0 0 43 136 0.00 0.01 0.00 0.01
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