U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number: 0-15938
Farmstead Telephone Group, Inc.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1205743
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
22 Prestige Park Circle
East Hartford, CT 06108
(Address of principal executive offices) (Zip Code)
(860) 610-6000
(Registrant's telephone number)
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 past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 10, 2001, the registrant had 3,272,579 shares of its
$0.001 par value Common Stock outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
(In thousands) 2001 2000
---------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 893 $ 374
Accounts receivable, less allowance for
doubtful accounts 4,076 6,527
Inventories 6,959 7,181
Deferred taxes and other current assets 224 197
------------------------------------------------------------------------
Total Current Assets 12,152 14,279
------------------------------------------------------------------------
Property and equipment, net 591 632
Deferred taxes and other non-current assets 589 583
------------------------------------------------------------------------
Total Assets $13,332 $15,494
========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,092 $ 3,789
Debt maturing within one year (Note 2) 88 102
Accrued expenses and other current
liabilities (Note 3) 757 1,493
------------------------------------------------------------------------
Total Current Liabilities 3,937 5,384
------------------------------------------------------------------------
Long-term debt (Note 2) 1,700 1,726
Other liabilities 221 182
------------------------------------------------------------------------
Total Liabilities 5,858 7,292
------------------------------------------------------------------------
Minority Interest in Subsidiary (Note 4) 226 -
Stockholders' Equity (Note 5):
Preferred stock, $0.001 par value; 2,000,000
shares authorized; no shares issued and
outstanding - -
Common stock, $0.001 par value; 30,000,000
shares authorized; 3,272,579 shares issued
and outstanding at June 30, 2001
and December 31, 2000 3 3
Additional paid-in capital 12,273 12,248
Accumulated deficit (5,028) (4,049)
------------------------------------------------------------------------
Total Stockholders' Equity 7,248 8,202
------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $13,332 $15,494
========================================================================
See accompanying notes to consolidated financial statements.
2
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
-------------------- --------------------
(In thousands, except income (loss) per share amounts) 2001 2000 2001 2000
-----------------------------------------------------------------------------------------------------------
Revenues $ 8,016 $11,125 $17,310 $20,574
Cost of revenues 6,685 8,984 13,554 16,481
-----------------------------------------------------------------------------------------------------------
Gross profit 1,331 2,141 3,756 4,093
Selling, general and administrative expenses 2,320 1,884 4,451 3,706
-----------------------------------------------------------------------------------------------------------
Operating income (loss) (989) 257 (695) 387
Interest expense (42) (84) (83) (199)
Other income 11 11 22 21
-----------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and minority
interest in income of subsidiary (1,020) 184 (756) 209
Provision for income taxes 4 5 22 7
-----------------------------------------------------------------------------------------------------------
Income (loss) before minority interest in income of
subsidiary (1,024) 179 (778) 202
Minority interest in income of subsidiary 109 - 201 -
-----------------------------------------------------------------------------------------------------------
Net income (loss) $(1,133) $ 179 $ (979) $ 202
===========================================================================================================
Basic and diluted net income (loss) per common share: $ (.35) $ .05 $ (.30) $ .06
Weighted average common shares outstanding:
Basic 3,273 3,273 3,273 3,273
Diluted 3,302 3,274 3,332 3,275
See accompanying notes to consolidated financial statements.
3
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30, 2001 and 2000
(In thousands) 2001 2000
----------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ (979) $ 202
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization 130 167
Minority interest in income of subsidiary 201 -
Value of compensatory stock options issued 25 16
Changes in operating assets and liabilities:
Decrease in accounts receivable 2,451 400
Decrease in inventories 222 405
Increase in other assets (33) (84)
(Decrease) increase in accounts payable (697) 1,421
(Decrease) increase in accrued expenses
and other current liabilities (736) 135
Increase in other liabilities 39 29
----------------------------------------------------------------------------------------
Net cash provided by operating activities 623 2,691
----------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (89) (106)
----------------------------------------------------------------------------------------
Net cash used in investing activities (89) (106)
----------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayments of inventory finance borrowings - (1,175)
Borrowings (repayments) under revolving credit line 11 (1,404)
Repayments of capital lease obligation (51) (55)
Capital contribution from minority interest partner 25 -
----------------------------------------------------------------------------------------
Net cash used in financing activities (15) (2,634)
----------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 519 (49)
Cash and cash equivalents at beginning of period 374 446
----------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 893 $ 397
========================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 84 $ 199
Income taxes 82 5
See accompanying notes to consolidated financial statements.
4
FARMSTEAD TELEPHONE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The interim financial statements are presented on a consolidated
basis, consisting of the accounts of Farmstead Telephone Group, Inc.
("Farmstead"), FTG Venture Corporation (inactive), a wholly owned
subsidiary, and InfiNet Systems, LLC, a 50.1% owned subsidiary
(collectively the "Company"). See Note 4 for further information on
InfiNet. The interim financial statements presented herein are unaudited,
however in the opinion of management these statements reflect all
adjustments, consisting of adjustments that are of a normal recurring
nature, which are necessary for a fair statement of results for the interim
periods presented. This Form 10-Q should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
Note 2. Debt Obligations
Long-term Debt
Long-term debt obligations consisted of the following (in thousands):
June 30, December 31,
2001 2000
----------------------------------------------------------------
Revolving credit agreement $1,700 $1,689
Obligation under capital lease 88 139
------------------------------------------------------------
1,788 1,828
Less current portion (88) (102)
------------------------------------------------------------
Long-term debt $1,700 $1,726
============================================================
As of June 30, 2001, the unused portion of the revolving credit
facility was approximately $6,300,000, of which approximately $1,897,000
was available under various borrowing formulas. The average and highest
amounts borrowed during the three months ended June 30, 2001 were
approximately $2.3 million and $2.9 million, respectively. The average and
highest amounts borrowed during the six months ended June 30, 2001 were
approximately $2.1 million and $2.9 million, respectively. The Company was
in compliance with its loan covenants as of June 30, 2001.
Note 3. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the
following (in thousands):
June 30, December 31,
2001 2000
--------------------------------------------------------------------------
Salaries, commissions and benefits $497 $1,137
License fees payable to Avaya 119 210
Other 141 146
----------------------------------------------------------------------
Accrued expenses and other current liabilities $757 $1,493
======================================================================
Note 4. Formation of Subsidiary
Effective February 1, 2001, the Company entered into a joint venture
agreement with TriNet Business Trust ("TriNet"), forming a limited
liability corporation operating under the name of InfiNet Systems, LLC
("InfiNet"). Under the agreement, the Company has a 50.1% ownership
interest, and TriNet has a 49.9% ownership interest. Incorporated under
the laws of the State of Delaware, and with operations currently based in
East Hartford, CT, InfiNet was organized for the purpose of selling new
Avaya telecommunications systems primarily to customers within the State of
Connecticut and various counties in the State of New York. InfiNet was
initially funded by an aggregate capital contribution of $50,000. InfiNet
recorded revenues of $2,277,000 and net income of $403,000 from its
inception to June 30, 2001. InfiNet's total assets at June 30, 2001 were
$1,245,000.
Since the Company owns greater than a 50% interest in, and exercises
significant control over, InfiNet, the financial statements of InfiNet have
been consolidated herein. All intercompany balances and transactions have
been eliminated.
5
Note 5. Stockholders' Equity
On July 18, 2001, the Company extended the expiration date of its
Class A and Class B Redeemable Common Stock Purchase Warrants (the
"Warrants") from August 12, 2001 to June 30, 2002. There are currently
1,137,923 of each class of Warrants outstanding, currently entitling the
holders to acquire one share of Common Stock at an exercise price of $2.00
per share. The Company also extended the expiration date of its 89,948
outstanding Representative Warrants from September 16, 2001 to June 30,
2002. The Representative Warrants entitle the holder to purchase 89,948
units at an exercise price of $2.90 per unit. Each unit consists of one
share of common stock, one Class A Warrant and one Class B Warrant. The
Representative Warrants were issued in 1996 to the Company's underwriter in
connection with a secondary offering of securities.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net Income (Loss)
The net loss for the three months ended June 30, 2001 was $1,133,000,
compared to $179,000 net income over the comparable 2000 period. The net
loss included a $325,000 charge to increase inventory valuation reserves,
$104,000 in employee termination costs, and $110,000 net income
attributable to the Company's 50.1 % ownership interest in the net income
of InfiNet. The net loss for the six months ended June 30, 2001 was
$979,000, compared with $202,000 net income for the six months ended June
30, 2000. The net loss for the six months ended June 30, 2001 included a
$325,000 charge to increase inventory valuation reserves, $104,000 in
employee termination costs, and $202,000 net income attributable to the
Company's 50.1 % ownership interest in the net income of InfiNet.
For the three months ended June 30, 2001, InfiNet recorded net income
of $220,000 on revenues of $1,327,000. From its February 2001 inception to
June 30, 2001, InfiNet recorded net income of $403,000 on revenues of
$2,277,000. See the notes to consolidated financial statements contained
elsewhere herein, for further information on InfiNet.
Revenues
Three months Six Months
ended June 30, Ended June 30,
------------------- --------------------
(In thousands) 2001 2000 2001 2000
---------------------------------------------------------------------------------
End-user parts and systems sales $6,341 $ 9,349 $13,888 $17,034
Sales to resellers 1,175 1,089 2,264 2,097
Services 500 687 1,158 1,443
---------------------------------------------------------------------------------
Consolidated revenues $8,016 $11,125 $17,310 $20,574
=================================================================================
Revenues for the three months ended June 30, 2001 were $8,016,000, a
decrease of $3,109,000, or 28% from the comparable 2000 period. End-user
parts and system sales revenues in the current three-month period amounted
to $6,341,000, a decrease of $3,008,000 or 32% from the comparable 2000
period. Equipment sales to other resellers in the current three-month
period amounted to $1,175,000, an increase of $86,000 or 8% from the
comparable 2000 period, while service revenues amounted to $500,000, a
decrease of $187,000 or 27% from the comparable 2000 period. Revenues for
the six months ended June 30, 2001 were $17,310,000, a decrease of
$3,264,000, or 16% over the comparable 2000 period. End-user parts and
system sales revenues in the current six-month period amounted to
$13,888,000, a decrease of $3,146,000 or 18% from the comparable 2000
period. Equipment sales to other resellers in the current six-month period
amounted to $2,264,000, an increase of $167,000 or 8% from the comparable
2000 period, while service revenues amounted to $1,158,000, a decrease of
$285,000 or 20% from the comparable 2000 period.
The Company believes that the reduction in revenues in the year 2001
is primarily attributable to current economic conditions and the slowdown
in capital spending for technology products, and to some extent the result
of a reduction in the Company's sales force due to turnover. Incremental
sales of systems generated by InfiNet has helped offset the slowdown in
parts sales. The Company expects that its future sales revenues will
improve as capital spending for technology products improve, although no
assurances can be given.
6
Cost of Revenues and Gross Profit
Total cost of revenues for the three months ended June 30, 2001 were
$6,685,000, a decrease of $2,299,000 or 26% over the comparable 2000
period. The gross profit for the three months ended June 30, 2001 was
$1,331,000, a decrease of $810,000 or 38% from the comparable 2000 period
As a percentage of revenue, the consolidated gross profit margin decreased
for the three months ended June 30, 2001 to 17% from 19% recorded in the
comparable 2000 period. Consolidated gross profit in the current year
consisted of a 15% profit margin generated by Farmstead (as compared with
19% recorded in the comparable 2000 period), and a 25% profit margin
generated by InfiNet. Excluding InfiNet, Farmstead's gross profit margin
was lower than the prior year due to (i) a $325,000 charge to increase
Farmstead's inventory obsolescence reserves to account for reduced demand
for certain telecommunications product lines, (ii) a special sales
promotional program to sell-off certain overstocked parts at reduced
prices, and (iii) lower margins from service revenues.
Total cost of revenues for the six months ended June 30, 2001 were
$13,554,000, a decrease of $2,927,000 or 18% from the six months ended June
30, 2000. The gross profit for the six months ended June 30, 2001 was
$3,756,000, a decrease of $337,000 or 8% from the six months ended June 30,
2000. As a percentage of revenue, the consolidated gross profit margin for
the six months ended June 30, 2001 increased to 22% from 20% recorded in
the comparable 2000 period. Consolidated gross profit in the current year
consisted of a 21% profit margin generated by Farmstead (as compared with
20% recorded in the comparable 2000 period), and a 24% profit margin
generated by InfiNet. Excluding InfiNet, Farmstead's gross profit margin
was slightly higher than the prior year due to several factors including a
shift in product mix (a higher percentage of end user parts sales were of
the more profitable used equipment vs. new equipment); lower labor and
overhead costs as a percent of revenues and the discontinuance of an
unprofitable equipment repair contract in the prior year.
Selling, General and Administrative ("SG&A") Expenses
SG&A expenses for the three months ended June 30, 2001 were
$2,320,000, an increase of $436,000 or 23% over the comparable 2000
period. SG&A expenses for the six months ended June 30, 2001 were
$4,451,000, an increase of $745,000 or 20% over the six months ended June
31, 2000. As a percentage of revenues, SG&A expenses for the three months
ended June 30, 2001 and 2000 were 29% and 17%, respectively. As a
percentage of revenues, SG&A expenses for the six months ended June 30,
2001 and 2000 were 26% and 18%, respectively.
The increase in SG&A expenses in the current year periods was
primarily attributable to (i) the start-up of InfiNet, which incurred
$114,000 and $149,000 of SG&A expenses during the three and six month
periods ended June 30, 2001, respectively; (ii) higher compensation costs,
including expenses incurred in locating, hiring and training new personnel,
and $104,000 of employee termination expenses in connection with the
departure of the Chief Operating Officer and a reduction in workforce;
(iii) increased bad debt write-offs; (iv) higher legal fees from the use
of outside counsel in day-to-day business and contract negotiation matters,
as well as one-time legal fees incurred during the current six month
period, principally in connection with amending the Company's By-laws and
Certificate of Incorporation, establishing an employee stock purchase plan
which was approved by stockholders at the June 14, 2001 annual meeting, and
in various other corporate governance matters; (v) higher net product
marketing expenses, attributable to reduced Avaya marketing cost
reimbursements under an Avaya-sponsored co-op marketing program; (vi)
increased sales travel and entertainment expenses; and (vii) higher
insurance premiums.
In July, 2001the Company effected a second reduction in its
workforce, reducing the number of employees by approximately 15%. The
Company is also reviewing its SG&A expenses in an effort to take whatever
cost-cutting measures it deems appropriate in light of current sales
levels.
Interest Expense, Other Income and Minority Interest
Interest expense for the three months ended June 30, 2001 was
$42,000, as compared to $84,000 for the comparable 2000 period. Interest
expense for the six months ended June 30, 2001 was $83,000 as compared to
$199,000 for the six months ended June 30, 2000. The decrease in interest
expense in both current year periods was attributable to both lower average
bank borrowings, and lower borrowing costs. During the six months ended
June 30, 2001, average bank borrowings approximated $2.1 million at an
average borrowing rate of 7.5%, compared with average bank borrowings of
$3.8 million at an average borrowing rate of 9.9% for the same six-month
period of 2000.
Other income for the three months and six months ended June 30, 2001
and 2000 consisted primarily of interest earned on invested cash.
Minority interest of $109,000 and $201,000 for the three and six
months ended June 30, 2001 represents the 49.9% share of the net income of
InfiNet accruing to its minority partner.
7
Liquidity and Capital Resources
Working capital was $8,215,000 at June 30, 2001, a decrease of
$680,000 or 7.6% from $8,895,000 at December 31, 2000. The working
capital ratio was 3.1 to 1 at June 30, 2001, compared with 2.7 to 1 at
December 31, 2000.
Operating activities provided $623,000 during the six months ended
June 30, 2001, principally as a result of a decrease in accounts
receivable, partially offset by a decrease in accounts payable, accrued
expenses and other current liabilities. Investing activities used $89,000
in the purchase of property and equipment.
Financing activities used $15,000, principally from repayments of the
capital lease obligation. The Company's loan agreement with its bank
contains certain financial covenants, and the Company was in compliance
with these covenants at June 30, 2001. As of June 30, 2001, the unused
portion of the revolving credit facility was approximately $6,300,000, of
which approximately $1,897,000 was available under various borrowing
formulas. The average and highest amounts borrowed during the three
months ended June 30, 2001 were approximately $2.3 million and $2.9
million, respectively. The average and highest amounts borrowed during the
six months ended June 30, 2001 were approximately $2.1 million and $2.9
million, respectively.
The Company is currently dependent upon its existing credit
agreements and accounts receivable collection experience to provide cash to
satisfy its working capital requirements. Material changes in its credit
agreements, or a slowdown in the collection of accounts receivable, could
negatively impact the Company. No assurances can be given that the Company
will have sufficient cash resources to finance future growth, and it may
become necessary to seek additional financing for such purpose. There are
currently no material commitments for capital expenditures.
Safe Harbor Forward-Looking Statements
The Company's prospects are subject to certain uncertainties and
risks. The discussions set forth in this Form 10-Q report contain certain
statements, based on current expectations, estimates, forecasts and
projections about the industry in which the Company operates and
management's beliefs and assumptions, which are not historical facts and
are considered forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 ("the Act"). Forward-looking
statements include, without limitation, any statement that may predict,
forecast, indicate, or imply future results, performance, or achievements,
and may contain the words "believe," "will be," "will continue," "will
likely result," "anticipates," "seeks to," "estimates," "expects,"
"intends," "plans," "predicts," "projects," and similar words, expressions
or phrases of similar meaning. The Company's actual results could differ
materially from those projected in the forward-looking statements as a
result of certain risks, uncertainties and assumptions which are difficult
to predict. The risks and uncertainties are detailed from time to time in
reports filed by the Company with the Securities and Exchange Commission
("SEC") including Forms 8-K, 10-Q, and 10-K, and include, among other
factors, general economic conditions and growth in the telecommunications
industry, competitive factors and pricing pressures, changes in product
mix, product demand, risk of dependence on third party suppliers, the
ability of the Company to sustain, manage or forecast its growth and
inventories, performance and reliability of products, customer service,
adverse publicity, business disruptions; increased costs of freight and
transportation to meet delivery deadlines, changes in business strategy or
development plans, turnover of key employees, and other risk factors
detailed in this report, described from time to time in the Company's other
SEC filings, or discussed in the Company's press releases. In addition,
other written or oral statements made or incorporated by reference from
time to time by the Company or its representatives in this report, other
reports, filings with the Securities and Exchange Commission, press
releases, conferences, or otherwise are forward-looking statements within
the meaning of the Act. All forward-looking statements included in this
document are based upon information available to the Company on the date
hereof. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
The risks included here are not exhaustive. Other sections of this
report may include additional factors which could adversely affect the
Company's business and financial performance. Moreover, the Company
operates in a very competitive and rapidly changing environment. New risk
factors emerge from time to time and it is not possible for management to
predict all such risk factors, nor can it assess the impact of all such
risk factors on its business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.
Investors should also be aware that while the Company does, from time
to time, communicate with securities analysts, it is against the Company's
policy to disclose to them any material information unless such information
shall have been previously or is simultaneously disclosed in a manner
intended to provide broad, nonexclusionary distribution of the
8
information to the public. Accordingly, shareholders should not assume that
the Company agrees with any statement or report issued by any analyst
irrespective of the content of the statement or report. Furthermore, the
Company has a policy against issuing or confirming financial forecasts or
projections issued by others. Thus, to the extent that reports issued by
securities analysts contain any projections, forecasts or opinions, such
reports are not the responsibility of the Company.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Market risks which have the potential to affect the Company's
earnings and cash flows result primarily from changes in interest rates.
The Company's cash equivalents, which consist of an investment in a money
market fund consisting of high quality short term instruments, principally
US government and agency issues and commercial paper, are subject to
fluctuating interest rates. A 10 percent change in such current interest
rates would not have a material effect on the Company's results of
operations or cash flow.
The Company is also exposed to market risk from changes in the
interest rate related to its revolving credit facility, which is based upon
a 30-day average LIBOR rate. Assuming an average borrowing level of $2.3
million (which amount represented the average amount borrowed under the
revolving credit facility during the three months ended June 30, 2001),
each 1 percentage point increase in the bank's lending rate would result in
$23,000 of additional annual interest charges. Under its current policies,
the Company does not use interest rate derivative instruments to manage
exposure to interest rate changes.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On February 28, 2001, the Board of Directors of the Company amended
and restated the By-laws of the Company in order to, among other things,
(i) adopt an advanced notice provision for nominations or other business to
be properly brought before an annual meeting by Stockholders; (ii)
eliminate the right of Stockholders to call special meetings; (iii) provide
that a quorum is a majority of shares entitled to vote, present, in person,
or represented by a proxy; (iv) amend the section pertaining to
indemnification of officers, directors, and employees; (v) require a super
majority vote of Stockholders to further amend the Amended and Restated By-
laws, in certain instances. A copy of the Amended and Restated By-laws of
the Company was filed as Exhibit 3(d) to the Annual Report on Form 10-K for
the period ending December 31, 2000.
On June 14, 2001, the Stockholders of the Company approved amendments
to the Company's Certificate of Incorporation in order to, among other
things, (i) require a super majority vote of Stockholders to further amend
the Certificate of Incorporation, in certain instances; (ii) create a
classified (aka "staggered") Board of Directors; (iii) amend the section
pertaining to indemnification of officers, directors, and employees; and
(iv) eliminate the right of Stockholders to act by written consent or to
call special meetings.
On July 18, 2001, the Company extended the expiration date of its
Class A and Class B Redeemable Common Stock Purchase Warrants (the
"Warrants") from August 12, 2001 to June 30, 2002. There are currently
1,137,923 of each class of Warrants outstanding, currently entitling the
holders to acquire one share of Common Stock at an exercise price of $2.00
per share. The Company also extended the expiration date of its 89,948
outstanding Representative Warrants from September 16, 2001 to June 30,
2002. The Representative Warrants entitle the holder to purchase 89,948
units at an exercise price of $2.90 per unit. Each unit consists of one
share of common stock, one Class A Warrant and one Class B Warrant. The
Representative Warrants were issued in 1996 to the Company's underwriter in
connection with a secondary offering of securities.
Item 4. Submission of Matters to a Vote of Security Holders:
The proposals voted upon at the Company's Annual Meeting of
Stockholders, held June 14, 2001, along with the voting results, were as
follows:
(1) Election of Directors: All nominees were elected: The results
of the balloting were as follows:
Votes Votes
Nominees For Withheld
-------------------------------------------------------
George J. Taylor, Jr. 2,968,636 127,778
Harold L. Hanson 2,964,936 131,478
9
Hugh M Taylor 2,967,886 128,528
Joseph J. Kelley 2,968,036 128,378
Bruce S. Phillips 2,968,336 128,078
(2) Approval of the Amendments to the Certificate of Incorporation:
The proposal was approved with 899,514 votes for, 176,992 votes
against, 3,124 abstentions and 2,016,766 not voted.
(3) Approval of the 2001 Employee Stock Purchase Plan: The proposal
was approved with 754,782 votes for, 315,633 votes against,
9,233 abstentions and 2,016,766 not voted.
(4) Ratification of the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the year ending
December 31, 2001: The proposal was approved with 3,020,161
votes for, 73,142 votes against, and 3,111 abstentions.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
The following documents are filed as Exhibits to this report on
Form 10-Q or incorporated by reference herein. Any document
incorporated by reference is identified by a parenthetical
referencing the SEC filing which included such document.
3(e) Certificate of Amendment of Certificate of Incorporation
of Farmstead Telephone Group, Inc., dated July 9, 2001.
4(j) Resolutions adopted by the Company's Board of Directors
July 19, 2001, amending terms of Warrants and
Underwriter's Options.
10(hh) Farmstead Telephone Group, Inc. 2001 Employee Stock
Purchase Plan [Appendix B to the Proxy Statement on
Schedule 14A filed April 13, 2001 for the 2001 Annual
Meeting of Stockholders]
21 Subsidiaries
(b) Reports on Form 8-K: On July 18, 2001,the Company filed Form
8-K indicating that the Board of Director's approved extending
the expiration of the Redeemable Class A (FTG. WS.A) and Class
B (FTG.WS.B) Common Stock Purchase Warrants from August 12,
2001 to June 30, 2002.
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.
FARMSTEAD TELEPHONE GROUP, INC.
Dated: August 10, 2001 /s/ George J. Taylor, Jr.
-------------------------------------
George J. Taylor, Jr.
Chief Executive Officer, President
Dated: August 10, 2001 /s/ Robert G. LaVigne
-------------------------------------
Robert G. LaVigne
Executive Vice President,
Chief Financial Officer
10