FTG Farmstead Telephone Grp.

Farmstead Telephone Group, Inc. Reports First Quarter 2005 Operating Results EAST HARTFORD, Conn., May 13 /PRNewswire-FirstCall/ -- Farmstead Telephone Group, Inc. (AMEX:FTG) announced operating results for the first quarter ended March 31, 2005. For the quarter ended March 31, 2005, revenues were $2,409,000, 29 percent below revenues of $3,406,000 reported for 2004. The Company reported a net loss for the quarter of $639,000, or $(0.19) per share, compared with a net loss of $341,000, or $(0.10) per share, in 2004. The net loss for the 2005 quarter included one-time expenses of $84,000 incurred in connection with the early termination of the Company's credit facility with Business Alliance Capital Corporation, in favor of a larger credit facility with The Laurus Master Fund, LTD ("Laurus"). The Company attributed its 2005 operating results to lower-than-expected revenues due to continued sales price erosion and some loss of market share as competition has intensified, particularly in the sale of parts and systems to larger companies; an undersized sales force; and a still cautious telecom equipment spending environment. Jean-Marc Stiegemeier, Farmstead's CEO and President commented, "Although first quarter revenues were disappointing, we nevertheless attained several significant milestones in the execution of our turnaround strategy. Beginning in March, we launched our Small and Medium Business (SMB) Group to sell products and services to businesses with 200 and fewer employees. We also hired 23 former Avaya sales and management professionals for the SMB group. Total new hires of sales and management professionals since March now stand at 29. In addition, we concluded a refinancing of our revolving credit facility, obtaining a $3 million credit line with Laurus, which will provide us the additional working capital to execute certain elements of our plan. During this period, we expanded our national footprint by seven states. Our rebuilding process is primarily focused on the SMB marketplace, and these efforts are now beginning to show results, as evidenced by a significant increase in March 2005 bookings and revenues over recent prior months. The first quarter was the beginning of our committed redirection of the Company. "On May 12, we announced the formation of our new wholly owned subsidiary, One IP Voice. When operational, One IP Voice will provide carrier-based Hosted IP Telephony solutions along with Network Services. The primary target of the One IP Voice offering will be the SMB market. The facilities-based One IP Voice offering will include Hosted IP Centrex and IP Trunking services, bundled with private One IP Voice "Last Mile" connectivity on a national basis, long distance calling, On Net calling, local area calling, 911 capabilities, and Wide Area Network (WAN) voice and data connectivity. One IP Voice will also offer a consumer VOIP product. "These are exciting times at Farmstead and for the industry. The companies that will survive this paradigm shift to VOIP will be the companies able to commit the intellectual and capital resources required to meet their customers changing needs. Farmstead is committed to continue building and executing a plan that will enhance shareholder value." About Farmstead Farmstead Telephone Group, Inc. is an Avaya Inc. Gold Business Partner, selling, installing and maintaining both new and refurbished Avaya business communications products nationwide. Further information about Farmstead Telephone may be found at http://www.farmstead.com/. Farmstead Telephone Group, Inc. Financial Summary Quarter Ended March 31, 2005 2004 Revenues $2,409,000 $3,406,000 Net Loss $(639,000) $(341,000) Basic and Diluted Net Loss Per Share $(.19) $(0.10) Basic and Diluted Weighted Average Shares Outstanding: 3,327,868 3,312,666 We are interested in your feedback and comments. To respond to questions from our management team, click here: http://www.b2i.us/sendFeedBack.asp?B=1042&RL=7853&S=12204 To add yourself to our email distribution list, click here: http://www.b2i.us/frame.asp?BzID=1042&to=ea&Nav=1&S=0&L=1 This release contains forward-looking statements that involve risks and uncertainties. In addition to historical information, investors should consider carefully the risks associated with an investment in the Company's securities as previously outlined by the Company in its prior filings with the Securities and Exchange Commission. CONTACT: Robert G. LaVigne, CFO Farmstead Telephone Group, Inc. Voice: 860-610-6002 Fax: 860-610-6001 DATASOURCE: Farmstead Telephone Group, Inc. CONTACT: Robert G. LaVigne, CFO of Farmstead Telephone Group, Inc., +1-860-610-6002 Web site: http://www.farmstead.com/

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