Washington, D.C. 20549
__________
Form 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996
[ ] Transition report under Section 13 or 15(d) of the
Exchange Act
For the transition period from _________ to __________
__________
Commission File Number: 0-15938
__________
Farmstead Telephone Group, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 06-1205743
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
81 Church Street, East Hartford, CT 06108-3728
(Address of principal executive offices) (Zip Code)
(860) 282-0010
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
As of July 31, 1996, there were 21,238,676 shares of the
issuer's $.001 par value Common Stock outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
TABLE OF CONTENTS TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements:
Consolidated Balance Sheets - June 30, 1996 and December 31,
1995 3
Consolidated Statements of Operations - Three Months Ended
June 30, 1996 and 1995 4
Consolidated Statements of Operations - Six Months Ended June
30, 1996 and 1995 5
Consolidated Statements of Cash Flows - Six Months Ended June
30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
PART I
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
(In thousands, except number of shares) 1996 1995
- -------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 751 $ 622
Accounts receivable, less allowance for doubtful accounts 3,254 2,691
Inventories 2,711 1,946
Other current assets 485 139
------ ------
Total current assets 7,201 5,398
Property and equipment, net of accumulated depreciation
and amortization 491 256
Investment in unconsolidated subsidiaries 226 201
Other assets 135 54
------ ------
Total assets $8,053 $5,909
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $1,967 $1,452
Accounts payable 2,140 1,053
Accrued expenses and other current liabilities 406 398
------ ------
Total current liabilities 4,513 2,903
------ ------
Stockholders' equity:
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;
2,123,906 shares issued and outstanding (Note 4) 2 2
Additional paid-in capital (Note 4) 8,450 8,450
Accumulated deficit (4,912) (5,446)
------ ------
Total stockholders' equity 3,540 3,006
------ ------
Total liabilities and stockholders' equity $8,053 $5,909
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Net sales and service revenues $4,648 $3,545
Cost of revenues 3,169 2,421
------ ------
Gross profit 1,479 1,124
------ ------
Operating expenses:
Selling, general and administrative expenses 1,342 1,188
Research and development expenses 24 7
------ ------
Total operating expenses 1,366 1,195
------ ------
Operating income (loss) 113 (71)
Interest expense (37) (23)
Equity in loss of unconsolidated subsidiary (3) -
Other income 132 3
------ ------
Income before income taxes 205 (91)
Provision for income taxes 3 4
------ ------
Net income (loss) $ 202 $ (95)
====== ======
Net income (loss) per share (Note 4) $ .09 $ (.04)
====== ======
Weighted average common and common equivalent shares (Note 4) 2,153 2,122
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Net sales and service revenues $8,770 $7,258
Cost of revenues 6,085 4,964
------ ------
Gross profit 2,685 2,294
------ ------
Operating expenses:
Selling, general and administrative expenses 2,427 2,330
Research and development expenses 58 13
------ ------
Total operating expenses 2,485 2,343
------ ------
Operating income (loss) 200 (49)
Interest expense (67) (37)
Equity in loss of unconsolidated subsidiary (15) -
Other income 424 7
------ ------
Income before income taxes 542 (79)
Provision for income taxes 8 10
------ ------
Net income (loss) $ 534 $ (89)
====== ======
Net income (loss) per share (Note 4) $ .25 $( .04)
====== ======
Weighted average common and common equivalent shares (Note 4) 2,147 2,109
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
FARMSTEAD TELEPHONE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
(In thousands) 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 534 $ (89)
Adjustments to reconcile net income to net cash flows
provided by (used in) operating activities:
Depreciation and amortization 67 67
Equity in undistributed loss of unconsolidated subsidiary 15 -
Changes in operating assets and liabilities:
Increase in accounts receivable (563) (253)
Increase in inventories (765) (734)
Increase in other assets (325) (79)
Increase in accounts payable, accrued expenses
and other liabilities 1,095 26
------ ------
Net cash provided by (used in) operating activities 58 (1,062)
------ ------
Cash flows from investing activities:
Purchases of property and equipment (302) (83)
Purchases of redeemable coupons (840) -
Redemptions of coupons 738 -
Investment in unconsolidated subsidiaries (40) (159)
------ ------
Net cash used in investing activities (444) (41)
------ ------
Cash flows from financing activities:
Proceeds from short-term borrowings 515 1,105
Repayments of short-term borrowings and
capital lease obligation - (587)
Proceeds from exercise of stock options and warrants, net - 288
Proceeds from sales of common stock, net - 4
------ ------
Net cash provided by financing activities 515 810
------ ------
Net increase (decrease) in cash and cash equivalents 129 (494)
Cash and cash equivalents at beginning of period 622 904
------ ------
Cash and cash equivalents at end of period $ 751 $ 410
====== ======
Supplemental schedule of non-cash financing and investing activities:
Proceeds receivable from exercise of warrants - $ 133
Capital contribution obligation to ATC - 240
Issuance of common stock in exchange for software license - 75
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 67 $ 41
Income taxes 13 5
</TABLE>
See accompanying notes to consolidated financial statements.
FARMSTEAD TELEPHONE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The interim financial statements for 1996 are presented on a
consolidated basis (see Note 3), consisting of the accounts of
Farmstead Telephone Group, Inc. and its majority-owned
subsidiaries (the "Company"). The interim financial statements
presented herein are unaudited, however in the opinion of
management 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. For further
information, refer to the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1995.
Beginning in 1996, the Company has changed the presentation
format of the Consolidated Statement of Operations to provide
more detailed information for the readers of this statement.
Comparative amounts for 1995 have also been conformed to this
presentation format.
NOTE 2. OTHER ASSETS
As part of a class action lawsuit settlement in 1995, AT&T was
required to issue approximately 4.2 million $50 face value
coupons to the class action members. The coupons are freely
transferable and are redeemable against the cost of certain
specified AT&T telephone system products or maintenance services
sold by the Company during the period May 1, 1995 through June
1, 1997. In 1996, the Company began purchasing coupons in the
marketplace at a discount to their $50 face value and redeeming
them with AT&T subject to a maximum discount of 20% of the
sales price up to a $2,500 maximum discount per transaction.
The Company's accounting policy is to record income in an amount
equal to the excess of the face value of the coupons redeemed
over the acquisition cost of the coupons, in the period in which
it can calculate the amount of rebate it has earned. During the
three and six months ended June 30, 1996 the Company recorded
approximately $130,000 and $410,000, respectively as other
income from the redemption of coupons applicable to prior period
sales. Rebates earned on current year purchases are recorded
in cost of sales after the related products are sold. During
the three and six months ended June 30, 1996, rebates credited
to cost of sales amounted to approximately $205,000 and
$260,000, respectively. Included in other assets at June 30,
1996 are rebates receivable of $ 145,000, representing cash due
the Company from tendered redeemable coupons, and $102,000 of
unused coupons, at cost. The Company believes it will be able
to utilize all of the unused rebate coupons it has purchased
before their June 1, 1997 expiration.
NOTE 3. FORMATION OF SUBSIDIARY
Effective February 29, 1996, the Company purchased from AT&T
Systems Leasing Corporation, a subsidiary of AT&T Capital
Corporation, certain assets of its discontinued Asset Recovery
Center ("ARC") for a purchase price of $250,000. Prior to its
closing in January 1996, the ARC primarily operated to service
AT&T affiliates in the orderly disposition, by way of
consignment sales arrangements, of excess, overstocked and
end-of-life telecommunications, computer and data transmission
equipment. The assets acquired consisted primarily of warehouse
equipment, vehicles, computer and office equipment, and
inventory. The Company concurrently formed a subsidiary
corporation, Farmstead Asset Management Services, LLC ("FAMS"),
which is using the purchased assets in a similar operation in
Piscataway, New Jersey. The Company is attempting to
re-establish certain of the relationships that the ARC enjoyed,
however, no assurances can be given that it will be able to do
so. The Company believes that the operations of FAMS will
provide it with an opportunity to develop new sources of
equipment for resale to its existing customers, as well as to
other wholesalers in the telephone, data and computer secondary
markets, and internationally.
NOTE 4. RIGHTS OFFERING
On August 12, 1996, the Company's Registration Statement on Form
SB-2 was declared effective by the Securities and Exchange
Commission, and the Company commenced a Rights Offering, to
stockholders of record on August 12, 1996, of one million Units,
each Unit consisting of one share of Common Stock, one
Redeemable Class A Warrant and one Redeemable Class B Warrant,
at an offer price of $4.06 per Unit. For a thirty day period
following the record date, eligible stockholders have a
non-transferable preferential Right to purchase Units in an
amount equivalent to approximately .47 Units for each share of
common stock owned on the record date, as adjusted for a 1 for
10 reverse stock split as further described below. Eligible
stockholders will also have the right to indicate their interest
to purchase additional Units not subscribed for by other
stockholders, subject to availability. All Units not purchased
in the rights offering will be offered, on a firm commitment
basis, by Schneider Securities, Inc., the Company's principal
underwriter in this transaction.
As a prerequisite for the proposed public offering, the Company
implemented a 1 for 10 reverse stock split which became
effective August 13, 1996, which had the effect of reducing the number
of outstanding shares of common stock prior to the commencement of the Rights
Offering from 21,243,676 to 2,124,406, and the number of outstanding
warrants from 1,835,727 to 183,579. In this report, all per
share amounts and numbers of shares have been restated to
reflect the reverse stock split. In addition, the common stock
amount shown on the consolidated balance sheet has been restated
to reflect the $.001 par value of the post reverse split common
shares, with a transfer of approximately $19,000 to additional
paid in capital.
The Company expects to raise, net of expenses, approximately
$3.2 to $3.7 million from the rights offering/standby
underwriting. The Company intends to use the proceeds of this
public offering to finance and expand the Company's business,
both domestically and internationally, which could include the
acquisition of other businesses, although the Company currently
has no specific agreements. Proceeds will also be used to
further develop products, to expand the Company's product
marketing, and for general working capital purposes.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Sales and service revenues for the three months ended June 30,
1996 were $4,648,000, representing an increase of $1,103,000 or
31% over the comparable prior year period. The increase was
attributable to the Company's telephone equipment products and
services, which were up by 36% over the comparable prior year
period due to an increase in end user sales, partially offset by
a 40% decrease in sales of voice processing products and
services due to the expiration of the Company's OEM contract
with AT&T in February 1996. Revenues from telephone equipment
sales and services accounted for 81% of consolidated revenues
for the three months ended June 30, 1996 (78% in the comparable
1995 period), while revenues from voice processing product sales
and services accounted for 10% of consolidated revenues in 1996
(22% in 1995). The Company's newly formed subsidiary, FAMS,
began operations in February 1996 , and its revenues accounted
for 9% of consolidated second quarter 1996 revenues.
Sales and service revenues for the six months ended June 30,
1996 were $8,770,000, representing an increase of $1,512,000 or
21% over the comparable prior year period. The increase was
attributable to the Company's telephone equipment products and
services, which were up by 31% over the comparable prior year
period due to an increase in end user sales, partially offset by
a 37% decrease in sales of voice processing products and
services due to the expiration of the Company's OEM contract
with AT&T in February 1996. Revenues from telephone equipment
sales and services accounted for 82% of consolidated revenues
for the six months ended June 30, 1996 (76% in the comparable
1995 period), while revenues from voice processing product sales
and services accounted for 13% of consolidated revenues in 1996
(24% in 1995). Revenues generated by FAMS accounted for 5% of
consolidated revenues for the six months ended June 30, 1996.
Gross profit for the three months ended June 30, 1996 was 32% of
revenues as compared to 32% of revenues for the comparable prior
year period. Rebates earned from AT&T on current period
purchases, net of coupon acquisition costs, are recorded in
cost of sales in the period in which the related products are
sold. During the three months ended June 30, 1996, net rebates
credited to cost of sales amounted to $205,000 which had the
effect of increasing the Company's gross profit margin to 32%
from 27% otherwise realized. Excluding the effect of the
rebates, increased product acquisition costs on certain
telephone system parts was the principal reason for a lower
profit margin from the prior year. As a re-seller of used
telephone equipment, the nature of the Company's business is
such that product acquisition costs continually fluctuate based
upon the source of supply, availability of such equipment in the
marketplace and on market demand, as well as on the mix of
products sold during the reporting period. The Company is not
aware of any market conditions which would cause gross profit
margins to significantly fluctuate from current levels.
Gross profit for the six months ended June 30, 1996 was 31% of
revenues as compared to 32% of revenues for the comparable prior
year period. During the six months ended June 30, 1996, net
rebates credited to cost of sales amounted to $260,000 which had
the effect of increasing the Company's gross profit margin to
32% from 28% otherwise realized. Excluding the effect of the
rebates and as described above, increased product acquisition
costs on certain telephone system parts was the principal reason
for a lower profit margin from the prior year.
Selling, general & administrative expenses for the three months
ended June 30, 1996 were $1,342,000 (29% of revenues) as
compared to $1,188,000 (34% of revenues) for the comparable 1995
period. The $154,000 increase in SG&A was attributable to SG&A
expenses incurred by FAMS, which began operations in 1996, and
to increased sales commissions and other operating costs
associated with the Company's increased business volume. These
increased costs were partly offset by (i) the discontinuance in
1995 of the Company's in-house service bureau and the marketing
of the VTS-1000/2000 product line, which accounted for costs of
approximately $118,000 and (ii) a $69,000 overall reduction in
international market development costs which were principally
incurred solely in the 1995 period pursuant to certain voice
processing product joint venture agreements which were
terminated in November 1995.
Selling, general & administrative expenses for the six months
ended June 30, 1996 were $2,427,000 (28% of revenues) as
compared to $2,330,000 (32% of revenues) for the comparable 1995
period. The $98,000 increase in SG&A was attributable to
SG&A expenses incurred by FAMS, which began operations in 1996,
and to increased sales commissions and other operating costs
associated with the Company's increased business volume. These
increased costs were partly offset by (i) the discontinuance in
1995 of the Company's in-house service bureau and the marketing
of the VTS-1000/2000 product line, which accounted for costs of
approximately $216,000 and (ii) a $236,000 overall reduction in
international market development costs, of which approximately
one-half were incurred solely in the 1995 period pursuant to
certain voice processing product joint venture agreements which
were terminated in November 1995.
Other income for the three months ended June 30, 1996 was
$132,000 as compared to $3,000 for the comparable 1995 period.
Included in other income for 1996 was $130,000 related to
rebates earned from AT&T on coupons tendered for redemption, net
of coupon acquisition costs. The rebates are a result of
coupons issued by AT&T in 1995 in settlement of a lawsuit, and
are freely transferable and can be used towards the cost of AT&T
products and services purchased from May 1995 through June 1,
1997. In 1996 the Company began purchasing coupons at a
discount to their $50 face value and redeeming them with AT&T
for the full $50 face value. Accordingly, the Company is
recording as other income the difference between the face value
of the coupons and their acquisition cost. The Company expects
to continue to take advantage of the coupon redemption program
through its June 1, 1997 expiration date. However, the Company
is unable to predict the program's effect on future operating
results since (i) the supply of coupons in the after-market is
limited, (ii) the Company's acquisition cost for the coupons can
fluctuate, (iii) beginning June 1, 1996, rebates are restricted
to systems and maintenance services sold (previously, component
parts were also separately included in the program), and (iv) in
any event, the Company cannot reasonably estimate its future
sales activity of products subject to the rebate program. See
Note 2 of the Notes to Consolidated Financial Statements
(Unaudited) included elsewhere herein.
Other income for the six months ended June 30, 1996 was $424,000
as compared to $7,000 for the comparable 1995 period. Included
in other income for 1996 was $410,000 of rebates from AT&T as
more fully described above.
Interest expense for the three and six months ended June 30,
1996 was $37,000 and $67,000 respectively, as compared to
$23,000 and $37,000 for the respective three and six month
periods of 1995. The increases in the current year periods were
attributable to higher average borrowings under the Company's
revolving credit facility.
Liquidity and Capital Resources
Net working capital at June 30, 1996 was $2,688,000, an 8%
increase over the $2,495,000 of net working capital at December
31, 1995. The working capital ratio at June 30, 1996 was 1.6 to
1 as compared to 1.9 to 1 at December 31, 1995.
Operating activities provided $58,000 of cash during the six
months ended June 30, 1996, principally as a result of the
Company's $534,000 net profit. Operating assets, net of
liabilities, increased as a result of the operations of
FAMS, and due to higher levels of accounts receivable and
inventories attributable to higher sales levels.
Investing activities used $444,000 of cash during the six months
ended June 30, 1996, principally in the purchase of warehouse
equipment, vehicles, computer and office equipment for use by
FAMS in its business operations. As of June 30, 1996, the
Company had $102,000 invested in coupons redeemable against
future AT&T product purchases, as more fully described in Note 2
of the Notes to Consolidated Financial Statements contained
herein. In June 1996, the Company received approval from the
Securities and Exchange Commission of the Republic of the
Philippines for the formation of a Philippine corporation in
which the Company invested $40,000 for a 40% ownership interest.
The corporation was formed for the purpose of refurbishing,
installing and selling electronics and telecommunications
equipment, and is expected to be fully operational during the
third quarter of 1996.
On March 13, 1996, FAMS entered into a two year lease for
approximately 70,100 square feet of warehouse and office space
in Piscataway, New Jersey at a monthly rent of $24,827. This
facility is used for the remarketing of used AT&T telephone and
computer equipment, and for the provision of asset storage and
management services. Start-up costs of this operation
approximated $350,000, consisting principally of the $250,000
asset purchase price plus relocation and other operating costs.
Financing activities provided $515,000 of cash during the six
months ended June 30, 1996 attributable to borrowings under the
Company's revolving credit line.
The Company has satisfied its 1996 cash requirements to date
through the use of existing cash from operations and through
borrowings under its revolving credit facility. The average
and highest amounts borrowed under this credit facility during
the six months ended June 30, 1996 was $1,192,000 and
$1,992,000, respectively. The Company's borrowings are
dependent upon the continuing generation of collateral, subject
to its $2 million credit line.
The Company believes that it has sufficient capital resources to
satisfy the working capital requirements of its present level of
operations, but may require additional sources of capital in
order to significantly expand its operations. As more fully
described in Note 4 of the Notes to consolidated financial
statements contained herein, on August 13, 1996 the Company
commenced a Rights Offering, to stockholders of record on August
12, 1996, of one million Units, each Unit consisting of one
share of Common Stock, one Redeemable Class A Warrant and one
Redeemable Class B Warrant, at an offer price of $4.06 per Unit.
For a thirty day period following the record date, stockholders
of record have a non-transferable preferential Right to purchase
Units in an amount equivalent to their proportional ownership of
the Company's common stock as of the record date. All Units
not purchased in the rights offering will be offered, on a firm
commitment basis, by Schneider Securities, Inc., the principal
underwriter in this transaction.
The Company expects to raise, net of expenses, approximately
$3.2 to $3.7 million from the rights offering/standby
underwriting. The Company intends to use the proceeds of this
public offering to finance and expand the Company's business,
both domestically and internationally, which could include the
acquisition of other businesses, although the Company currently
has no specific agreements. Proceeds will also be used to
further develop products, to expand the Company's product
marketing, and for general working capital purposes.
Inflation has not been a significant factor in the Company's
operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Effective May 31, 1996, the Company extended the expiration date
of its Public Warrants to 5:00 p.m. Eastern Standard Time on
June 30, 1997. In addition, the following modifications were
also made: (i) the exercise price of said warrants was reduced
from $2.00 per share to $.50 per share, and (ii) the market
price triggering redemption of said warrants, at the option of
the Company, was reduced from $3.00 per share to $1.125 per
share.
Effective August 13, 1996, the Company implemented a 1 for 10
reverse split of its outstanding $.001 Par Value Common Stock.
The reverse split also had the following effect on the Company's
outstanding Public Warrants: (i) the exercise price of said
warrants was increased to $5.00 per share, and (ii) the market
price triggering redemption of said warrants, at the option of
the Company, was adjusted to $11.25 per share.
Item 3. Defaults Upon Senior Securities
None.
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 13, 1996, along with the voting results,
were as follows:
(1) Election of Directors: All nominees were elected. The
results of balloting was as follows:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
George J. Taylor, Jr. 17,466,723 450,970
Robert G. LaVigne 17,510,923 406,770
Harold L. Hansen 17,499,423 418,270
Hugh M. Taylor 17,495,323 422,370
Joseph J. Kelley 17,495,423 422,270
</TABLE>
(2) Proposal to amend the Certificate of Incorporation to
authorize a reverse stock split: The proposal was approved with
14,310,003 votes for, 2,945,716 votes against, 115,784
abstentions and 546,190 broker non-votes.
(3) Proposal to ratify the appointment of Deloitte & Touche LLP
as independent auditors of the Company for the year ending
December 31, 1996: The proposal was approved with 17,552,143
votes for, 101,125 votes against, and 264,425 abstentions.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The following exhibit is filed herewith:
11. Statement Re: Computation of Per Share Earnings.
(b) Reports on Form 8-K: None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FARMSTEAD TELEPHONE GROUP, INC.
Dated: August 13, 1996 /s/ Robert G. LaVigne
Robert G. LaVigne
Vice President - Finance and
Administration, Chief Financial Officer
EXHIBIT 11. STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
Three and Six Months Ended June 30, 1996 and 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months Six months
ended 6/30 ended 6/30
------------- -------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding 2,124 2,059 2,124 2,049
Net effect of dilutive stock options and warrants based on
the treasury stock method using average market price 29 63 23 60
----- ----- ----- -----
Total weighted average shares 2,153 2,122 2,147 2,109
===== ===== ===== =====
Net income (loss) $ 202 $ (95) $ 534 $ (89)
===== ===== ===== =====
Per share amount $ .09 $(.04) $ .25 $(.04)
===== ===== ===== =====
</TABLE>
In calculating weighted average shares, all securities
convertible into common stock are excluded if their inclusion
would have the effect of increasing the earnings per share
amount or decreasing the loss per share amount otherwise
computed. Fully diluted earnings per share is not presented
because it is immaterial and anti-dilutive in both periods.
For purposes of this schedule, weighted average shares and per
share amounts shown for each period presented have been restated
to give effect to a 1 for 10 reverse stock split implemented
August 13, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 751
<SECURITIES> 0
<RECEIVABLES> 3,254
<ALLOWANCES> 0
<INVENTORY> 2,711
<CURRENT-ASSETS> 7,201
<PP&E> 491
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,053
<CURRENT-LIABILITIES> 4,513
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 3,538
<TOTAL-LIABILITY-AND-EQUITY> 8,053
<SALES> 8,770
<TOTAL-REVENUES> 8,770
<CGS> 6,085
<TOTAL-COSTS> 6,085
<OTHER-EXPENSES> 43
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67
<INCOME-PRETAX> 542
<INCOME-TAX> 8
<INCOME-CONTINUING> 534
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 534
<EPS-PRIMARY> .25
<EPS-DILUTED> 0
</TABLE>
