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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): March 17, 2006
FARMSTEAD TELEPHONE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-15938 06-1205743
(State or other jurisdiction of (Commission (IRS Employer
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 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
On March 17, 2006 the Company sold 91,433 Unit shares of Series A
Preferred Stock to the following investors (the "Investors") at a price of
$17.00 per Unit: Sotomar - Empreendimentos Industriais e Imobiliarios, SA,
William A. Boyd, Suzy Ulrich, Richard J Cranmer, Watamar & Partners SA,
Thomas Barrett, Case Holdings Co., Inc., Allan Sorensen, Chuck & Joy Hartz,
Hartz Family Foundation, Barton Ferris, Jr. and William Harner. 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 $1,422,958.
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.
Warrant to Purchase Shares of Stock. The Investors received warrants
to purchase up to an aggregate 457,165 shares of the Company's common stock
at an exercise price of $2.125 per share. The warrant expires five
2
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 and the issuance of 44,117
Unit shares of Series A Preferred Stock to Meadowbrook Opportunity Fund
LLC, as such transaction is more fully described in the Company's Current
Report of Form 8-K filed with the Securities and Exchange Commission on
February 24, 2006, the Company issued to its placement agent warrants (the
"Placement Agent Warrants") (i) to purchase up to an aggregate 101,660
shares of the Company's common stock at an exercise price of $2.125 per
share and (ii) to purchase up to an aggregate 20,332 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 Secuirities 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
March 17, 2006, entered into with Sotomar - Empreendimentos
Industriais e Imobiliarios, SA, William A. Boyd, Suzy Ulrich,
Richard J Cranmer, Watamar & Partners SA, Thomas Barrett, Case
Holdings Co., Inc., Allan Sorensen, Chuck & Joy Hartz, Hartz
Family Foundation, Barton Ferris, Jr. and William Harner
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: March 21, 2006
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