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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 5, 2006
FARMSTEAD TELEPHONE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-15938 06-1205743
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
22 Prestige Park Circle, East Hartford, CT 06108-3728
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 610-6000
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 4.02 Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review.
On April 5, 2006 the Audit Committee of Farmstead Telephone Group,
Inc. (the "Company") met with the Company's independent accountants and the
Company's Principal Accounting Officer and concluded that the Company's
unaudited consolidated financial statements included in Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2005, June 30, 2005 and
September 30, 2005 should no longer be relied upon because they did not
reflect proper accounting treatment of the Company's convertible debt and
associated warrants issued to the Laurus Master Fund, Ltd. It was
determined that the accounting corrections have no impact on previously
reported revenues, operating losses or cash for the previously reported
periods. The Audit Committee has directed the Company to file restated
quarterly reports for 2005 and this Form 8-K Current Report.
During the course of closing its books and preparing its Annual
Report on Form 10-K for the year ended December 31, 2005, the Company
became aware that it may have misinterpreted the accounting rules
applicable to its convertible debt facility with Laurus, as well as the
free-standing warrants issued to Laurus in March 2005. The Company
subsequently concluded that the Laurus convertible notes were to be treated
as "non-conventional debt", and because the notes and warrants contain
certain conversion features that are considered derivative financial
instruments, the Company is required to apply the accounting methodology
pursuant to EITF 00-19 "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company's Own Stock". As a
result, the previously issued quarterly financial statements for 2005
mentioned above will be restated to record debt discounts and derivative
instrument liabilities at the end of each reporting period and the impact
on previously reported net loss from "mark-to-market" changes in the fair
value of the derivative instrument liabilities during each reported period.
The Company filed its Annual Report on Form 10-K for the year ended
December 31, 2005 on April 12, 2006, and the information contained therein
related to its results of operations and financial position for the year
ended December 31, 2005 may be relied upon. The Company expects to file
restated Quarterly Reports on Form 10-Q for the quarters ended March 31,
2005, June 30, 2005 and September 30, 2005 in the near future. Management
expects to report the following changes in the following amounts previously
reported (amounts in thousands of dollars, except for per share amounts):
Quarter Ended
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2005 (Unaudited) (As previously reported) March 31 June 30 September 30
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Consolidated Balance Sheets:
Total assets $4,538 $6,190 $6,291
Total liabilites 3,102 5,215 4,939
Stockholders' equity (deficiency) 1,436 975 1,352
Consolidated Results of Operations:
Revenues 2,409 4,483 4,807
Gross Profit 754 1,336 1,239
Operating loss (630) (429) (646)
Net loss (639) (474) (704)
Loss per common share:
Basic and diluted $ (.19) $ (.14) $ (.20)
Weighted average common shares outstanding:
Basic and diluted 3,328 3,353 3,511
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Quarter Ended
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2005 (Unaudited) (As restated) March 31 June 30 September 30
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Consolidated Balance Sheets:
Total assets $4,686 $6,352 $6,467
Total liabilities 3,829 5,282 7,231
Stockholders' equity (deficiency) 857 1,070 (764)
Consolidated Results of Operations:
Revenues 2,409 4,483 4,807
Gross Profit 754 1,336 1,239
Operating loss (630) (429) (646)
Net income (loss) (1,032) 202 (2,648)
Income (loss) per common share:
Basic $ (.31) $ .06 $ (.75)
Diluted (.31) .05 (.75)
Weighted average common shares outstanding:
Basic 3,328 3,353 3,511
Diluted 3,328 4,391 3,511
ITEM 9. 01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
None.
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 hereunto duly authorized.
FARMSTEAD TELEPHONE GROUP, INC.
By: /s/ Robert G. LaVigne
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Robert G. LaVigne
Executive Vice President &
Chief Financial Officer
Date: April 12, 2006
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