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
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(Address of principal executive offices)
Registrant's telephone number, including area code: (617)692-7000
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- -----------------------------------------------------------------
(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