===========================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
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 17, 2006
FARMSTEAD TELEPHONE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-12155 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
---------------------------------------------------------------------------
(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))
===========================================================================
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
On April 17, 2006 the Company sold 64,906 Unit shares of Series A
Preferred Stock to the following investors (the "Investors") at a price of
$17.00 per Unit: Michael Bloch, Robert A. Smith, Robert Gillman, Julian
Eaton, Julian F. & Mary J. Eaton, Robert H. Chanson, Joan Robertson, Robert
B. Rowley, William M. Goatley Revocable Trust DTD 05/09/89, MidSouth
Investor Fund LP, Ronald C. Smiley, Lewis Opportunity Fund, LP, Sat P.
Dewan, Dewan Retirement Plan Trust, Richard Dwayne Roberson, OT Finance,
SA, Robert W. Russell, Joseph & Kimberly Greenspan, Thomas Link, Nite
Capital, Richard & Christine VonderSitt, Deborah A. Picon, Danid P. Hanlon,
S. Wistar Lewis, Alan S. Wirshborn, Gail B. Shanklin, Benjamin S.
Eichholtz, as Custodian for David Eichholtz and Daniel Eichholtz, Michaels
Associates. Each Unit consists of (i) one share of the Company's Series A
Preferred Stock, $.001 par value per share, and (ii) a Warrant to purchase
five shares of the Company's Common Stock, par value $.001 per share, at an
exercise price of $2.125 per share (the Series A Preferred Stock and the
Warrant together "Securities"). The Securities were not registered under
the Securities Act of 1933, as amended, or applicable state securities
laws. The Securities are subject to restrictions on transferability and
resale and may not be transferred or resold except as permitted under the
Securities Act of 1933, as amended, and applicable state securities laws,
pursuant to registration or exemption from those laws.
The proceeds received by the Company, net of fees and expenses
incurred by the Company's placement agent, were $1,011,968.
The following describes certain of the material terms of this
transaction. The description below is not a complete description of the
terms of the financing transaction and is qualified in its entirety by
reference to the agreements entered into in connection therewith which are
included as exhibits to this Current Report on Form 8-K.
Series A Preferred Stock. Each Investor received certain rights in
connection with its purchase of the Series A Preferred Stock:
* The Investor shall be entitled to receive in preference to any
dividend on the Common Stock a cumulative non-compounding
dividend at the rate of 8% per annum of the original Preferred
A Per Share Price.
* In the event of any liquidation or winding up of the Company,
the Investor shall be entitled to receive in preference to the
holders of the Common Stock an amount equal to two times the
original Preferred A Per Share Price plus any declared but
unpaid dividends.
* The conversion price of the Series A Preferred Stock will be
subject to a weighted average adjustment (based on all deemed
outstanding shares of Common Stock and shares of Preferred
Stock) and to reduce dilution in the event that the Company
issues additional equity securities (other than the shares
reserved for issuance under or to Laurus Master Fund Ltd., the
Company's Stock Option Plan, the Company's Employee Stock
Purchase Plan, employees, officers, consultants and directors
of the Company, and under other currently existing options,
warrants and obligations to issue shares) at a purchase price
less than the Series A Preferred Stock conversion price. The
Series A Preferred Stock conversion price will also be subject
to proportional adjustment for stock splits, stock dividends,
recapitalizations and the like.
* The Series A Preferred Stock will vote together with the Common
Stock and not as a separate class except as required by law,
however, the Series A Preferred Stock, exclusively and as a
separate class, will be entitled to elect one (1) director of
the Corporation. Each share of Series A Preferred Stock shall
have a number of votes equal to the number of shares of Common
Stock then issuable upon conversion of such share of Series A
Preferred Stock.
The foregoing provisions were incorporated in the Certificate of
Designation filed with the Secretary of State of the State of Delaware on
February 17, 2006.
2
Warrant to Purchase Shares of Stock. The Investors received warrants
to purchase up to an aggregate 324,530 shares of the Company's common stock
at an exercise price of $2.125 per share. The warrant expires five years
from issuance. In lieu of exercising the warrant with cash, the Holder may
elect to receive that number of shares of common stock equal to the value
of the warrant (or that portion being exercised) at the time of exercise.
In connection with the above transactions, the Company issued to its
placement agent warrants (the "Placement Agent Warrants") (i) to purchase
up to an aggregate 48,675 shares of the Company's common stock at an
exercise price of $2.125 per share and (ii) to purchase up to an aggregate
9,735 shares of the Company's Series A Preferred Stock at an exercise price
of $17.00 per share. The Placement Agent Warrants expire ten years from
issuance. In lieu of exercising the warrants with cash, the placement
agent may elect to receive that number of shares of common stock or Series
A Preferred Stock, as applicable, equal to the value of the warrant (or
that portion being exercised) at the time of exercise.
Registration rights. The Company agreed to use its best efforts to
register the common stock underlying the Securities for resale via a Form
S-3 or other appropriate registration statement ("Registration Statement")
within 90 days after the completion of the Series A Offering. The Company
agreed to respond to Securities and Exchange Commission Registration
Statement comments within 10 days and request effectiveness of the
Registration Statement within 3 days of "no review" or "no further
comments".
ITEM 9. 01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Series A Preferred Stock and Warrant Purchase Agreement dated
February 17, 2006, entered into with, Michael Bloch, Robert A.
Smith, Robert Gillman, Julian Eaton, Julian F. & Mary J. Eaton,
Robert H. Chanson, Joan Robertson, Robert B. Rowley, William M.
Goatley Revocable Trust DTD 05/09/89, MidSouth Investor Fund
LP, Ronald C. Smiley, Lewis Opportunity Fund, LP, Sat P. Dewan,
Dewan Retirement Plan Trust, Richard Dwayne Roberson, OT
Finance, SA, Robert W. Russell, Joseph & Kimberly Greenspan,
Thomas Link, Nite Capital, Richard & Christine VonderSitt,
Deborah A. Picon, Danid P. Hanlon, S. Wistar Lewis, Alan S.
Wirshborn, Gail B. Shanklin, Benjamin S. Eichholtz, as
Custodian for David Eichholtz and Daniel Eichholtz and Michaels
Associates
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
-------------------------------
Robert G. LaVigne
Executive Vice President &
Chief Financial Officer
Date: April 21, 2006
3