TELKONET, INC.
As
filed
with the Securities and Exchange Commission on May 15, 2007
Registration
No. 333-
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT
Under
The
Securities Act of 1933
TELKONET,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
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Utah
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87-0627421
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(State
or Other Jurisdiction of Incorporation or Organization)
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(I.R.S.
Employer Identification No.)
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20374
Seneca Meadows Parkway, Germantown, Maryland 20876
(240) 912-1800
(Address,
Including Zip Code, and Telephone Number, Including Area Code
of
Registrant’s Principal Executive Offices)
Ronald
W. Pickett
Chief
Executive Officer
20374
Seneca Meadows Parkway
Germantown,
Maryland 20876
(Name
and
Address, Including Zip Code, of Agent for Service)
(240) 912-1800
(Telephone
Number, Including Area Code, of Agent for Service)
copy
to:
William
J. Conti, Esq.
Baker
& Hostetler LLP
1050
Connecticut Avenue, NW
Suite 1100
Washington,
D.C. 20036
202-861-1726
202-861-1783
(fax)
APPROXIMATE
DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon effectiveness of
this
registration statement.
If
the
only securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box.
o
If
any of
the securities being registered on this form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. þ
If
this
form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. o
If
this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If
delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. o
CALCULATION
OF REGISTRATION FEE
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Title
of each Class of Securities To Be Registered
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Amount
To
Be
Registered
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Proposed
Maximum
Offering
Price
Per Share
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Proposed
Maximum
Aggregate
Offering
Price
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Amount
Of
Registration
Fee
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Common
Stock, $0.001 par value
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2,304,012(1)
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$4.17
(2)
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$9,607,730
(2)
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$294.96
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(1)
Pursuant to Rule 416(a), this Registration Statement shall also cover any
additional shares of the registrant’s common stock that become issuable by
reason of any stock splits, stock dividends or similar
transactions.
(2)
Estimated in accordance with Rule 457 solely for the purpose of determining
the registration fee.
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission (SEC),
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. The selling
stockholders named in this prospectus may not sell these securities until the
Securities and Exchange Commission declares our registration statement
effective. This prospectus is not an offer to sell the securities and is not
soliciting an offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
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Subject
to completion, dated May 15, 2007
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PROSPECTUS
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TELKONET,
INC.
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2,304,012
Shares
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Common
Stock
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This
prospectus covers 2,304,012 shares of our common stock that may be offered
and sold from time to time by the selling stockholders. We will not receive
any
proceeds from the sale of the shares of our common stock pursuant to this
prospectus. We will bear the costs relating to the registration of the shares
of
our common stock, which we estimate to be approximately $15,295.
The
selling stockholders may sell the shares of our common stock through ordinary
brokerage transactions or through any other means described in this prospectus
under “PLAN OF DISTRIBUTION.” The price at which the selling stockholders may
sell the shares will be determined by the prevailing market price for the shares
or in negotiated transactions.
Our
common stock is listed on the American Stock Exchange (“AMEX”) under the symbol
“TKO.” On May 11, 2007, the last reported sale price of our common stock was
$2.30.
Investing
in shares of our common stock involves risks. See “RISK FACTORS” beginning on
page 3 of this prospectus.
Neither
the SEC nor any state securities commission has approved or disapproved of
these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
No
dealer, salesperson or other person has been authorized to give any information
or to make any representations other than those contained in or incorporated
by
reference into this prospectus in connection with the offer contained in this
prospectus and, if given or made, such information or representations must
not
be relied upon as having been authorized by us. Neither the delivery of this
prospectus nor any sale made hereunder shall under any circumstances create
an
implication that there has been no change in our affairs since the date hereof.
The selling stockholders named in this prospectus are offering to sell, and
seeking offers to buy, shares of our common stock only in jurisdictions where
such offers and sales are permitted. The information contained in, and
incorporated by reference into, this prospectus speaks only as of the date
of
this prospectus unless the information specifically indicates that another
date
applies.
The
date
of this prospectus is ________, 2007.
TABLE
OF CONTENTS
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THE
COMPANY
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1
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RISK
FACTORS
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3
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FORWARD-LOOKING
STATEMENTS
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8
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USE
OF PROCEEDS
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9
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SELLING
STOCKHOLDERS
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9
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PLAN
OF DISTRIBUTION
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10
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EXPERTS
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11
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LEGAL
MATTERS
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12
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INFORMATION
INCORPORATED BY REFERENCE
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12
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WHERE
YOU CAN FIND MORE INFORMATION
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12
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DISCLOSURE
OF SEC POSITION ON INDEMNIFICATION OF SECURITIES ACT
LIABILITIES
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13
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THE
COMPANY
This
summary highlights selected information contained elsewhere in this prospectus
and incorporated into this prospectus by reference. This summary may not contain
all of the information that may be important to you in considering an investment
in our common stock. You should carefully read the entire prospectus, including
the documents that are incorporated by reference into this prospectus, before
making an investment decision. Unless the context requires otherwise, references
in this prospectus to “Telkonet,” the “company,” “we,” “us,” and “our” refer to
Telkonet, Inc.
Overview
Telkonet,
Inc., formed in 1999, develops and markets technology for the transmission
of
high-speed voice, video and data communications over the existing electrical
wiring within a building. Telkonet has made definitive inroads into the
Powerline communication (PLC) market and established the “leading” position for
in-building commercial communication solutions.
The
Company’s offices are located at 20374 Seneca Meadows Parkway, Germantown,
Maryland 20876. The reports that the Company files pursuant to the Securities
Exchange Act of 1934 can be found at the Company’s web site at
www.telkonet.com.
Business
We
classify our operations in two reportable segments: the Telkonet Segment and
the
MST Segment.
Telkonet
Segment
Through
the revolutionary Telkonet iWire System™, Telkonet utilizes proven PLC
technology to deliver commercial high-speed Broadband access from an IP
“platform” that is easy to deploy, reliable and cost-effective by leveraging a
building’s existing electrical infrastructure. The building’s existing
electrical wiring becomes the backbone of the local area network, which converts
virtually every electrical outlet into a high-speed data port without the costly
installation of additional wiring or major disruption of business activity.
The
Telkonet iWire System™ offers a viable and cost-effective alternative to the
challenges of hardwiring and wireless local area networks (LANs). Telkonet’s
products are designed for use in commercial and residential applications,
including multi-dwelling units and the hospitality and government markets.
Applications supported by the Telkonet “platform” include, but are not limited
to, VoIP telephones, internet connectivity, local area networking, video
conferencing, closed circuit security surveillance and a host of other
information services.
Telkonet’s
product has been installed in all present target market segments. Government
and
regulatory certifications have been obtained to sell the product
internationally. Telkonet has been shipping PLC products since 2003, initially
targeting the multi-hospitality unit market followed by the multi-dwelling
unit
market as well as the Government and Public Sector markets. Telkonet employs
both direct and indirect sales model to distribute and support product on a
worldwide basis.
On
March
9, 2007, the Company acquired substantially all of the assets of Smart Systems
International, a leading provider of energy management products and solutions
to
customers in the United States and Canada for cash and Company common stock
having an aggregate value of $7,000,000. The purchase price was comprised of
$875,000 in cash and 2,227,273 shares of the Company’s common stock. Of the
shares issued as part of the purchase price, 1,090,909 shares are being held
in
an escrow account for a period of one year following the closing from which
certain potential indemnification obligations under the purchase agreement
may
be satisfied. The aggregate number of shares held in escrow is subject to
adjustment upward or downward depending upon the trading price of the Company’s
common stock during the one year period following the closing date. The shares
of our common stock issued to SSI are included in the shares being registered
for resale by the selling stockholders pursuant to this prospectus. See “SELLING
STOCKHOLDERS” beginning on page 9 of this prospectus. The shares of common stock
issued to SSI were sold pursuant to the exemption provided by Section 4(2)
of
the Securities Act of 1933 and/or Rule 506 of Regulation D promulgated
thereunder on the basis that SSI is an "accredited investor" as such term is
defined in Rule 501 of Regulation D.
On
March
15, 2007, the Company acquired 100% of the outstanding membership units of
Ethostream, LLC, a network solutions integration company that offers
installation, sales and service to the hospitality industry. The Ethostream,
LLC
acquisition will enable Telkonet to provide installation and support for PLC
products and third party applications to customers across North America. The
purchase price of $11,756,097 was comprised of $2.0 million in cash and
3,459,609 shares of the Company’s common stock. The entire stock portion of the
purchase price is being held in escrow to satisfy certain potential
indemnification obligations of the sellers under the purchase agreement. The
shares held in escrow are distributable over the three years following the
closing. The aggregate number of shares issuable to the sellers is subject
to
downward adjustment in the event the Company’s common stock trades at or above a
price of $4.50 per share for twenty consecutive trading days during the one
year
period following the closing.
As
a
result of Telkonet's acquisition of Smart Systems International and
EthoStream, the Company can now provide hospitality owners with a
greater return on investment on technology investments. Hotel owners
can leverage the Telkonet iWire System™ platform to support wired and wireless
Internet access and, in the future, to support a networked energy management
system. With the synergy of Ethostream, LLC’s centralized remote monitoring and
management platform extending over HSIA, digital video surveillance and energy
management, hospitality owners will have a complete technology offering based
on
Telkonet’s core PLC system as the infrastructure backbone, demonstrating true
technology convergence.
MST
Segment
MST
is a
communications service provider offering quadruple play services to multi-tenant
unit (“and multi-dwelling unit residential, hospitality and commercial
properties. These Quad-Play services include video, voice, high-speed internet
and wireless fidelity access. In addition, MST currently offers or plans to
offer a variety of next-generation telecommunications solutions and services
including satellite installation, video conferencing, surveillance/security
and
energy management, and other complementary professional services.
NuVisions™
MST
currently offers digital television service through DISH Network, a national
satellite television provider, under its private label NuVisions™ brand of
services. The NuVisions TV offering currently includes over 500 channels of
video and audio programming, with a large high definition (more than 40
channels) and ethnic offering (over 100 channels from 17 countries) available
in
the market today. MST also offers its NuVisions Broadband high speed internet
service and NuVisions Digital Voice telephone service to multi-family residences
and commercial properties. MST delivers its broadband based services using
terrestrial fiber optic links and in February 2005, began deployment in New
York
City of a proprietary wireless gigabit network that connects properties served
in a redundant gigabit ring - a virtual fiber optic network in the air.
Wi-Fi
Network
MST
has
constructed a large NuVisions Wi-Fi footprint in New York City intended to
create a ubiquitous citywide Wi-Fi network. NuVisions Wi-Fi offers Internet
access in the southern-half of Central Park, Riverside Park from 60th to 79th
Streets, Dag Hammarskjold Plaza, and the United Nations Plaza. In addition,
MST
provides NuVisions Wi-Fi service in and around Trump Tower on Fifth Avenue,
Trump World Tower on First Avenue, the Trump Place properties located on
Riverside Boulevard, Trump Palace, Trump Parc, Trump Parc East as well as
portions of Roosevelt Island surrounding the Octagon residential community.
MST
currently has plans to deploy additional Wi-Fi “Hot Zones” throughout New York
City and continue to enlarge its Wi-Fi footprint as new properties are served.
Internet
Protocol Television (IPTV)
In
fourth
quarter of 2006, MST invested in an IPTV platform to deploy in 2007. IPTV is
a
method of distributing television content over IP that enables a more
user-defined, on-demand and interactive experience than traditional cable or
satellite television. The IPTV service delivers traditional cable TV programming
and enables subscribers to surf the Internet, receive on-demand content, and
perform a host of Internet-based functions via their TV sets.
Recent
Events
On
April
17, 2007, the Company received notification from the American Stock Exchange
(AMEX) that the Company is not in compliance with Section 120 of the AMEX
Company Guide, as certain of its related party transactions were not reviewed
by
the Company’s Audit Committee or a comparable body of its Board of Directors,
and Section 121(A) of the Company Guide, as the Company did not, at the time,
have a sufficient number of “independent” directors serving on its board of
directors such that at least a majority of such directors were independent.
In
addition, AMEX noted in its correspondence that it was concerned that certain
of
the Company’s officers and/or directors may not have complied with their filing
obligations pursuant to Section 16(a) of the Securities Exchange Act of 1934.
AMEX also expressed concern that the Company’s Board of Directors may have
approved certain stock option grants during the fiscal years ended December
31,
2004 through December 31, 2006, retroactively.
In
its
correspondence, AMEX instructed the Company to submit a Plan of Compliance
no
later than May 1, 2007 advising AMEX of the action it has taken, or will take,
to bring the Company into compliance with Sections 120 and 121(A) of the AMEX
Company Guide and to address the other concerns raised in its
letter.
Upon
notification from AMEX of its failure to comply with Sections 120 and 121(A),
Stephen Sadle, the Company’s Senior Vice President and a Director, agreed to
resign from the Board of Directors immediately following the identification
of a
qualified individual who could serve as an “independent” director, as such term
is defined in the Company Guide. Warren V. Musser, the Chairman of the Board
of
Directors, and Thomas Lynch, an independent director, commenced a search for
appropriate candidates to fill the board seat to be vacated by Mr. Sadle. On
April 23, 2007, the Company’s Board of Directors held a special meeting at which
Mr. Sadle resigned from the Board of Directors and Anthony J. Paoni was
unanimously elected to fill the seat vacated by Mr. Sadle. The Board of
Directors believes that Mr. Paoni meets the definition of independence as set
forth in the Company Guide. In addition to electing a new independent director,
at the special meeting, the Company’s Board of Directors unanimously adopted a
formal procedure pursuant to which it will refer all proposed related party
transactions directly to the Company’s Audit Committee for review, consideration
and approval. The Company believes the adoption of such a policy will facilitate
the Company’s ongoing compliance with Section 120 of the Company Guide.
The
Company submitted its formal Plan of Compliance to AMEX on May 1, 2007. As
of May 14, 2007, the Company continues to work with AMEX to make certain its
Plan of Compliance will be accepted or to determine whether further remediation
efforts will be required.
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and other information contained
in
or incorporated by reference into this prospectus and any accompanying
prospectus supplement before deciding to purchase any shares of our common
stock.
The
Company has a history of operating losses and an accumulated deficit and expects
to continue to incur losses for the foreseeable future.
Since
inception through March 31, 2007, the Company has incurred cumulative losses
of
$75,826,144 and has never generated enough funds through operations to support
its business. Additional capital may be required in order to provide
working
capital requirements for the next twelve months. The Company’s losses to date
have resulted principally from:
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research
and development costs relating to the development of the Telkonet
iWire
SystemTM
product suite;
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costs
and expenses associated with manufacturing, distribution and marketing
of
the Company’s products;
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general
and administrative costs relating to the Company’s operations;
and
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interest
expense related to the Company’s
indebtedness.
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The
Company is currently unprofitable and may never become profitable. Since
inception, the Company has funded its research and development activities
primarily from private placements of equity and debt securities, a bank loan
and
short term loans from certain of its executive officers. As a result of its
substantial research and development expenditures and limited product revenues,
the Company has incurred substantial net losses. The Company’s ability to
achieve profitability will depend primarily on its ability to successfully
commercialize the Telkonet iWire SystemTM
product
suite. If the Company is not successful in generating sufficient liquidity
from
operations or in raising sufficient capital resources on terms acceptable to
the
Company, this could have a material adverse effect on the Company’s business,
results of operations, liquidity and financial condition.
Potential
fluctuations in operating results could have a negative effect on the price
of
the Company’s common stock.
The
Company’s operating results may fluctuate significantly in the future as a
result of a variety of factors, most of which are outside the Company’s control,
including:
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the
level of use of the Internet;
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the
demand for high-tech goods;
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the
amount and timing of capital expenditures and other costs relating
to the
expansion of the Company’s
operations;
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price
competition or pricing changes in the
industry;
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technical
difficulties or system downtime;
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economic
conditions specific to the internet and communications industry;
and
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general
economic conditions.
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The
Company’s quarterly results may also be significantly impacted by certain
accounting treatment of acquisitions, financing transactions or other matters.
Such accounting treatment could have a material impact on the Company’s results
of operations and have a negative impact on the price of the Company’s common
stock.
If
the Company’s common stock ceases trading on the American Stock Exchange, an
investment in the Company’s common stock could become significantly less
liquid.
On
April
17, 2007, the Company received notification from the American Stock Exchange
(AMEX) that, as of such date, the Company was not in compliance with Sections
120 and 121(A) of the AMEX Company Guide, which compliance is required for
the
continued listing of the Company’s common stock on the AMEX. Although on May 1,
2007 the Company submitted a Plan of Compliance in response to AMEX’s
correspondence, if the Plan of Compliance is rejected, AMEX could take steps
to
delist the Company’s common stock from the exchange. If the Company’s common
stock ceases to trade on the AMEX, the trading market for the Company’s common
stock could be negatively impacted. Generally speaking, securities that are
not
traded on a national securities exchange tend to be less liquid and trade with
larger spreads between the bid and ask price than securities traded on exchanges
or automated quotation systems. As a result, holders of our common stock may
have some difficulty selling their shares in the open market if the Company
is
unable to maintain its listing on the AMEX.
A
significant portion of our total assets consists of goodwill, which is subject
to a periodic impairment analysis and a significant impairment determination
in
any future period could have an adverse effect on our results of operations
even
without a significant loss of revenue or increase in cash expenses attributable
to such period.
We
have
goodwill totaling approximately $17.8 million at March 31, 2007 resulting from
recent and past acquisitions. We evaluate this goodwill for impairment based
on
the fair value of the operating business units to which this goodwill relates
at
least once a year. This estimated fair value could change if we are unable
to
achieve operating results at the levels that have been forecasted, the market
valuation of those business units decreases based on transactions involving
similar companies, or there is a permanent, negative change in the market demand
for the services offered by the business units. These changes could result
in an
impairment of the existing goodwill balance that could require a material
non-cash charge to our results of operations.
The
Company’s directors and executive officers own a substantial percentage of the
Company’s issued and outstanding common stock. Their ownership could allow them
to exercise significant control over corporate decisions.
As
of
March 31, 2007, the Company’s officers and directors owned 15.5% of the
Company’s issued and outstanding common stock. This means that the Company’s
officers and directors, as a group, exercise significant control over matters
upon which the Company’s stockholders may vote, including the selection of the
Board of Directors, mergers, acquisitions and other significant corporate
transactions.
Further
issuances of equity securities may be dilutive to current
stockholders.
Although
the funds that were raised in the Company’s debenture offerings, the note
offerings and the private placement of common stock are being used for general
working capital purposes, it is likely that the Company will be required to
seek
additional capital in the future. This capital funding could involve one or
more
types of equity securities, including convertible debt, common or convertible
preferred stock and warrants to acquire common or preferred stock. Such equity
securities could be issued at or below the then-prevailing market price for
the
Company’s common stock. Any issuance of additional shares of the Company’s
common stock will be dilutive to existing stockholders and could adversely
affect the market price of the Company’s common stock.
The
exercise of options and warrants outstanding and available for issuance may
adversely affect the market price of the Company’s common
stock.
As
of
March 31, 2007, the Company had outstanding employee options to purchase a
total
of 9,174,929 shares of common stock at exercise prices ranging from $1.00 to
$5.97 per share, with a weighted average exercise price of $2.12. As of March
31, 2007, the Company had outstanding non-employee options to purchase a total
of 1,815,937 shares of common stock at an exercise price of $1.00 per share.
As
of March 31, 2007, the Company had warrants outstanding to purchase a total
of
7,310,819 shares of common stock at exercise prices ranging from $2.59 to $4.70
per share, with a weighted average exercise price of $4.14. The exercise of
outstanding options and warrants and the sale in the public market of the shares
purchased upon such exercise will be dilutive to existing stockholders and
could
adversely affect the market price of the Company’s common
stock.
The
communication industry is intensely competitive and rapidly evolving.
The
Company operates in a highly competitive, quickly changing environment, and
our
future success will depend on our ability to develop and introduce new services
and service enhancements that achieve broad market acceptance in MDU and
commercial sectors. The Company will also need to respond effectively to new
product announcements by our competitors by quickly introducing competitive
products. Delays in product development and introduction could result
in:
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loss
of or delay in revenue and loss of market
share;
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negative
publicity and damage to our reputation and brand;
and
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decline
in the selling price of our products and
services.
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Additionally,
new companies are constantly entering the market, thus increasing competition.
This could also have a negative impact on our ability to obtain additional
capital from investors. Larger companies who have been engaged in our industry
business for substantially longer periods of time may have access to greater
resources. These companies may have greater success in the recruitment and
retention of qualified employees, as well as in conducting their operations,
which may give them a competitive advantage. In addition, actual or potential
competitors may be strengthened through the acquisition of additional assets
and
interests. If the Company is unable to compete effectively or adequately respond
to competitive pressures, this may materially adversely affect our results
of
operation and financial condition. Large companies including Direct TV,
EchoStar, Time Warner, Cablevision and Verizon are active in our markets in
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provision and distribution of communications services and we will also have
to
compete with such companies.
The
Company is not large enough to negotiate cable television programming contracts
as favorable as some of our larger competitors.
Programming
costs are generally directly related to the number of subscribers to which
the
programming is provided, with discounts available to large traditional cable
operators and direct broadcast satellite (DBS) providers based on their high
subscriber levels. As a result, larger cable and DBS systems generally pay
lower
per subscriber programming costs. The Company has attempted to obtain volume
discounts from our suppliers. Despite these efforts, we believe that our per
subscriber programming costs are significantly higher than large cable operators
and DBS providers with which we compete in some of our markets. This may put
us
at a competitive disadvantage in terms of maintaining our operating results
while remaining competitive with prices offered by these providers. In addition,
as programming agreements come up for renewal, the Company cannot assure you
that we will be able to renew these agreements on comparable or favorable terms.
To the extent that we are unable to reach agreement with a programmer on terms
that we believe are reasonable, we may be forced to remove programming from
our
line-up, which could result in a loss of customers.
Government
regulation of the Company’s products could impair the Company’s ability to sell
such products in certain markets.
FCC
rules
permit the operation of unlicensed digital devices that radiate radio frequency
emissions if the manufacturer complies with certain equipment authorization
procedures, technical requirements, marketing restrictions and product labeling
requirements. Differing technical requirements apply to “Class A” devices
intended for use in commercial settings, and “Class B” devices intended for
residential use to which more stringent standards apply. An independent,
FCC-certified testing lab has verified that the Company’s Telkonet’s iWire
SystemTM
product
suite complies with the FCC technical requirements for Class A and Class B
digital devices. No further testing of these devices is required and the devices
may be manufactured and marketed for commercial and residential use. Additional
devices designed by the Company for commercial and residential use will be
subject to the FCC rules for unlicensed digital devices. Moreover, if in the
future, the FCC changes its technical requirements for unlicensed digital
devices, further testing and/or modifications of devices may be necessary.
Failure to comply with any FCC technical requirements could impair the Company’s
ability to sell its products in certain markets and could have a negative impact
on its business and results of operations.
Products
sold by the Company’s competitors could become more popular than the Company’s
products or render the Company’s products obsolete.
The
market for powerline communications products is highly competitive. The
HomePlug(TM)
Powerline
Alliance has grown over the past year and now includes many well recognized
brands in the networking and communications industries. These include Linksys
(a
Cisco company), Intel, GE, Motorola, Netgear, Sony and Samsung. With the
exception of Motorola, who recently introduced a commercial product, these
companies do not presently represent a direct competitive threat to the Company
since they only market and sell their products in the residential sector. There
can be no assurance that other companies will not develop PLC products that
compete with the Company’s products in the future. Some of these potential
competitors have longer operating histories, greater name recognition and
substantially greater financial, technical, sales, marketing and other
resources. These potential competitors may, among other things, undertake more
extensive marketing campaigns, adopt more aggressive pricing policies, obtain
more favorable pricing from suppliers and manufacturers and exert more influence
on the sales channel than the Company can. As a result, the Company may not
be
able to compete successfully with these potential competitors and these
potential competitors may develop or market technologies and products that
are
more widely accepted than those being developed by the Company or that would
render the Company’s products obsolete or noncompetitive. The Company
anticipates that potential competitors will also intensify their efforts to
penetrate the Company’s target markets. These potential competitors may have
more advanced technology, more extensive distribution channels, stronger brand
names, bigger promotional budgets and larger customer bases than the Company
does. These companies could devote more capital resources to develop,
manufacture and market competing products than the Company could. If any of
these companies are successful in competing against the Company, its sales
could
decline, its margins could be negatively impacted, and the Company could lose
market share, any of which could seriously harm the Company’s business and
results of operations.
The
failure of the internet to continue as an accepted medium for business commerce
could have a negative impact on the Company’s results of
operations.
The
Company’s long-term viability is substantially dependent upon the continued
widespread acceptance and use of the Internet as a medium for business commerce.
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users. There can be no assurance that the
Internet infrastructure will continue to be able to support the demands placed
on it by this continued growth. In addition, delays in the development or
adoption of new standards and protocols to handle increased levels of Internet
activity or increased governmental regulation could slow or stop the growth
of
the Internet as a viable medium for business commerce. Moreover, critical issues
concerning the commercial use of the Internet (including security, reliability,
accessibility and quality of service) remain unresolved and may adversely affect
the growth of Internet use or the attractiveness of its use for business
commerce. The failure of the necessary infrastructure to further develop in
a
timely manner or the failure of the Internet to continue to develop rapidly
as a
valid medium for business would have a negative impact on the Company’s results
of operations.
The
Company may not be able to obtain patents, which could have a material adverse
effect on its business.
The
Company’s ability to compete effectively in the powerline technology industry
will depend on its success in acquiring suitable patent protection. The Company
currently has several patents pending. The Company also intends to file
additional patent applications that it deems to be economically beneficial.
If
the Company is not successful in obtaining patents, it will have limited
protection against those who might copy its technology. As a result, the failure
to obtain patents could negatively impact the Company’s business and results of
operations.
Infringement
by third parties on the Company’s proprietary technology and development of
substantially equivalent proprietary technology by the Company’s competitors
could negatively impact the Company’s business.
The
Company’s success depends partly on its ability to maintain patent and trade
secret protection, to obtain future patents and licenses, and to operate without
infringing on the proprietary rights of third parties. There can be no assurance
that the measures the Company has taken to protect its intellectual property,
including those integrated to its Telkonet iWire SystemTM
product
suite, will prevent misappropriation or circumvention. In addition, there can
be
no assurance that any patent application, when filed, will result in an issued
patent, or that the Company’s existing patents, or any patents that may be
issued in the future, will provide the Company with significant protection
against competitors. Moreover, there can be no assurance that any patents issued
to, or licensed by, the Company will not be infringed upon or circumvented
by
others. Infringement by third parties on the Company’s proprietary technology
could negatively impact its business. Moreover, litigation to establish the
validity of patents, to assert infringement claims against others, and to defend
against patent infringement claims can be expensive and time-consuming, even
if
the outcome is in the Company’s favor. The Company also relies to a lesser
extent on unpatented proprietary technology, and no assurance can be given
that
others will not independently develop substantially equivalent proprietary
information, techniques or processes or that the Company can meaningfully
protect its rights to such unpatented proprietary technology. Development of
substantially equivalent technology by the Company’s competitors could
negatively impact its business.
The
Company depends on a small team of senior management, and it may have difficulty
attracting and retaining additional personnel.
The
Company’s future success will depend in large part upon the continued services
and performance of senior management and other key personnel. If the Company
loses the services of any member of its senior management team, its overall
operations could be materially and adversely affected. In addition, the
Company’s future success will depend on its ability to identify, attract, hire,
train, retain and motivate other highly skilled technical, managerial,
marketing, purchasing and customer service personnel when they are needed.
Competition for these individuals is intense. The Company cannot ensure that
it
will be able to successfully attract, integrate or retain sufficiently qualified
personnel when the need arises. Any failure to attract and retain the necessary
technical, managerial, marketing, purchasing and customer service personnel
could have a negative effect on the Company’s financial condition and results of
operations.
Any
acquisitions we make could result in difficulties in successfully managing
our
business and consequently harm our financial condition.
We
may
seek to expand by acquiring competing businesses in our current or other
geographic markets, including as a means to acquire spectrum. We cannot
accurately predict the timing, size and success of our acquisition efforts
and
the associated capital commitments that might be required. We expect to face
competition for acquisition candidates, which may limit the number of
acquisition opportunities available to us and may lead to higher acquisition
prices. There can be no assurance that we will be able to identify, acquire
or
profitably manage additional businesses or successfully integrate acquired
businesses, if any, without substantial costs, delays or other operational
or
financial difficulties. In addition, acquisitions involve a number of other
risks, including:
| |
•
|
failure
of the acquired businesses to achieve expected
results;
|
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•
|
diversion
of management’s attention and resources to
acquisitions;
|
| |
•
|
failure
to retain key customers or personnel of the acquired businesses;
|
| |
•
|
disappointing
quality or functionality of acquired equipment and people:
and
|
| |
•
|
risks
associated with unanticipated events, liabilities or
contingencies.
|
Client
dissatisfaction or performance problems at a single acquired business could
negatively affect our reputation. The inability to acquire businesses on
reasonable terms or successfully integrate and manage acquired companies, or
the
occurrence of performance problems at acquired companies, could result in
dilution, unfavorable accounting treatment or one-time charges and difficulties
in successfully managing our business.
Our
inability to obtain capital, use internally generated cash or debt, or use
shares of our common stock to finance future acquisitions could impair the
growth and expansion of our business.
Reliance
on internally generated cash or debt to finance our operations or complete
acquisitions could substantially limit our operational and financial
flexibility. The extent to which we will be able or willing to use shares of
our
common stock to consummate acquisitions will depend on our market value which
will vary, and liquidity. Using shares of our common stock for this purpose
also
may result in significant dilution to our then existing stockholders. To the
extent that we are unable to use our common stock to make future acquisitions,
our ability to grow through acquisitions may be limited by the extent to which
we are able to raise capital through debt or additional equity financings.
No
assurance can be given that we will be able to obtain the necessary capital
to
finance any acquisitions or our other cash needs. If we are unable to obtain
additional capital on acceptable terms, we may be required to reduce the scope
of any expansion or redirect resources committed to internal purposes. In
addition to requiring funding for acquisitions, we may need additional funds
to
implement our internal growth and operating strategies or to finance other
aspects of our operations. Our failure to: (i) obtain additional capital on
acceptable terms; (ii) use internally generated cash or debt to complete
acquisitions because it significantly limits our operational or financial
flexibility; or (iii) use shares of our common stock to make future
acquisitions, may hinder our ability to actively pursue our acquisition
program.
We
rely on a limited number of third party suppliers. If these companies fail
to
perform or experience delays, shortages, or increased demand for their products
or services, we may face shortages, increased costs, and may be required to
suspend deployment of our products and services.
We
depend
on a limited number of third party suppliers to provide the components and
the
equipment required to deliver our solutions. If these providers fail to perform
their obligations under our agreements with them or we are unable to renew
these
agreements, we may be forced to suspend the sale and deployment of our products
and services and enrollment of new customers, which would have an adverse effect
on our business, prospects, financial condition and operating
results.
Our
management and operational systems might be inadequate to handle our potential
growth.
We
may
experience
growth
that could place a significant strain upon our management and operational
systems and resources. Failure to manage our growth effectively could have
a
material adverse effect upon our business, results of operations and financial
condition. Our ability to compete effectively as a provider of PLC technology
and a provider of digital satellite television and high-speed Internet
products and services and to manage future growth will require us to continue
to
improve our operational systems, organization and financial and management
controls, reporting systems and procedures. We may fail to make these
improvements effectively. Additionally, our efforts to make these improvements
may divert the focus of our personnel. We must integrate our key executives
into
a cohesive management team to expand our business. If new hires perform poorly,
or if we are unsuccessful in hiring, training and integrating these new
employees, or if we are not successful in retaining our existing employees,
our
business may be harmed. To manage the growth we will need to increase our
operational and financial systems, procedures and controls. Our current and
planned personnel, systems, procedures and controls may not be adequate to
support our future operations. We may not be able to effectively manage such
growth, and failure to do so could have a material adverse effect on our
business, financial condition and results of operations.
We
may be affected if the United States participates in wars or military or other
action or by international terrorism.
Involvement
in a war or other military action or acts of terrorism may cause significant
disruption to commerce throughout the world. To the extent that such disruptions
result in (i) delays or cancellations of customer orders, (ii) a general
decrease in consumer spending on information technology, (iii) our inability
to
effectively market and distribute our services or products or (iv) our inability
to access capital markets, our business and results of operations could be
materially and adversely affected. We are unable to predict whether the
involvement in a war or other military action will result in any long-term
commercial disruptions or if such involvement or responses will have any
long-term material adverse effect on its business, results of operations, or
financial condition.
FORWARD-LOOKING
STATEMENTS
This
prospectus, any prospectus supplement and the information incorporated by
reference may contain “forward-looking statements,” which represent our
expectations or beliefs, including, but not limited to, statements concerning
industry performance and our results, operations, performance, financial
condition, plans, growth and strategies, which include, without limitation,
statements preceded or followed by or that include the words “may,” “will,”
“expect,” “anticipate,” “intend,” “could,” “estimate,” or “continue” or the
negative or other variations thereof or comparable terminology. Any statements
contained in this prospectus, any prospectus supplement or the information
incorporated by reference that are not statements of historical fact may be
deemed to be forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, some of which are beyond our
control, and actual results may differ materially depending on a variety of
important factors, many of which are also beyond our control. You should not
place undue reliance on these forward-looking statements, which speak only
as of
the date of this prospectus. We do not undertake any obligation to update or
release any revisions to these forward-looking statements to reflect events
or
circumstances after the date of this prospectus or to reflect the occurrence
of
unanticipated events, except to the extent such updates and/or revisions are
required to prevent these forward-looking statements from being materially
false
or misleading.
USE
OF PROCEEDS
All
net
proceeds from the sale of our common stock will go to the selling stockholders
selling common stock under this prospectus. We will not receive any proceeds
from the sale of the common stock sold by the selling stockholder.
SELLING
STOCKHOLDERS
The
shares of common stock being offered pursuant to this prospectus by the selling
stockholders include shares of common stock issued to stockholders in partial
consideration of the purchase of substantially all of such selling stockholders’
assets by the Company and upon exercise of the warrants held by the other
selling stockholders, which were issued to such selling stockholders acting
as
placement agents for the Company’s private placement of common stock that was
completed on February 2, 2007. We are registering the shares of common stock
in
order to permit the selling stockholders to offer the shares for resale from
time to time. Except for the ownership of the common stock or warrants the
selling stockholders have not had any material relationship with us within
the
past three years.
The
table
below lists the selling stockholders and other information regarding the
beneficial ownership of the shares of common stock by the selling stockholders.
The second column lists the number of shares of common stock beneficially owned
by the selling stockholders. The third column lists the shares of common stock
being offered by this prospectus by the selling stockholders. The
selling stockholders may sell all, some or none of their shares in this
offering. See, “Plan of Distribution” beginning on page 10 of this
prospectus.
|
|
|
|
|
|
|
Maximum
Number of Shares
|
|
|
|
|
|
Number
of Shares Owned
|
|
to
be Sold Pursuant to this
|
|
Number
of Shares Owned
|
|
Name
of Selling Stockholder
|
|
Prior
to Offering
|
|
Prospectus
|
|
After
Offering (1)
|
|
Carl
Berg
|
|
|
161,654
|
|
|
|
161,654
|
|
|
|
0
|
|
|
Theresa
M. Clemens, Trustee (2)
|
|
|
1,374
|
|
|
|
1,374
|
|
|
|
0
|
|
|
Joseph
and Nadine Cracraft
|
|
|
3,427
|
|
|
|
3,427
|
|
|
|
0
|
|
|
John
and Loiuse Fredrickson
|
|
|
50,512
|
|
|
|
50,512
|
|
|
|
0
|
|
|
John
LaPorta
|
|
|
17,187
|
|
|
|
17,187
|
|
|
|
0
|
|
|
Gordon
McDonald
|
|
|
3,614
|
|
|
|
3,614
|
|
|
|
0
|
|
|
Galen
Miler
|
|
|
3,624
|
|
|
|
3,624
|
|
|
|
0
|
|
|
Robert
McBride
|
|
|
3,614
|
|
|
|
3,614
|
|
|
|
0
|
|
|
David
D. Moon
|
|
|
33,154
|
|
|
|
33,154
|
|
|
|
0
|
|
|
Gretchen
I. Riley
|
|
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78,806
|
|
|
|
78,806
|
|
|
|
0
|
|
|
Harry
W. Stuermer
|
|
|
72,550
|
|
|
|
72,550
|
|
|
|
0
|
|
|
William
R. Dukes
|
|
|
43,671
|
|
|
|
43,671
|
|
|
|
0
|
|
|
Ron
Pitt
|
|
|
68,182
|
|
|
|
68,182
|
|
|
|
0
|
|
|
James
J. Rothgery
|
|
|
23,809
|
|
|
|
23,809
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|
|
|
0
|
|
|
OCM/GFI
Power Opportunities Fund, L.P.
|
|
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463,004
|
|
|
|
463,004
|
|
|
|
0
|
|
|
Highland
Liquidation Corp.
|
|
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1,199,091
|
|
|
|
1,199,091
|
|
|
|
0
|
|
|
BPC
Group Holdings LLC (3)
|
|
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65,339
|
|
|
|
65,339
|
|
|
|
0
|
|
|
Barry
W. Zelin
|
|
|
402,712
|
|
|
|
4,275
|
|
|
|
398,437
|
|
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David
L. Jordon
|
|
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316,775
|
|
|
|
4,275
|
|
|
|
312,500
|
|
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Axiom
Capital Management (4)
|
|
|
2,850
|
|
|
|
2,850
|
|
|
|
0
|
|
|
(1)
|
Assumes
that all of the shares being offered under this prospectus are sold
and
that the selling stockholder acquires no additional shares of common
stock
before the completion of this offering.
|
|
(2)
|
Trustee
of the James E. and Teresa M. Clemens Family Trust Dated April 8,
1994
|
|
(3)
|
Joel
Magerman, Managing Partner and CEO of BPC Group Holdings LLC, has
sole
voting and dispositive power of the securities held by BPC Group
Holdings
LLC.
|
|
(4)
|
Mark
Martino, President of Axiom Capital Management has voting and dispositive
power of the securities held by Axiom Capital Management.
|
PLAN
OF DISTRIBUTION
We
are
registering the shares of common stock to permit the resale of these shares
of
common stock by the holder thereof from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
stockholders of the shares of common stock. We will bear all fees and expenses
incident to our obligation to register the shares of common stock.
The
selling stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions
or
agent's commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be affected in transactions, which may involve crosses or block
transactions,
| · |
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
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| · |
in
the over-the-counter market;
|
| · |
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
| · |
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
| · |
in
ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
|
| · |
in
block trades in which the broker-dealer will attempt to sell the
shares as
agent but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
| · |
in
purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
|
| · |
in
an exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
in
privately negotiated transactions;
|
| · |
in
sales pursuant to Rule 144;
|
| · |
in
transactions pursuant to which broker-dealers may agree with the
selling
stockholders to sell a specified number of such shares at a stipulated
price per share;
|
| · |
in
a combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
If
the
selling stockholders effect such transactions by selling shares of common stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or
to
whom they may sell as principal (which discounts, concessions or commissions
as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales
of
the shares of common stock or otherwise, the selling stockholders may enter
into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short
and
deliver shares of common stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales.
The
selling stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares.
The
selling stockholders may pledge or grant a security interest in some or all
of
the shares of common stock owned by them and, if they default in the performance
of their secured obligations, the pledgees or secured parties may offer and
sell
the shares of common stock from time to time pursuant to this prospectus or
any
amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933, as amended, amending, if necessary, the list
of
selling stockholders to include the pledgee, transferee or other successors
in
interest as selling stockholders under this prospectus. The selling stockholders
also may transfer and donate the shares of common stock in other circumstances,
in which case, the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this
prospectus.
Any
broker-dealers participating in the distribution of the shares of common stock
may be deemed to be "underwriters" within the meaning of the Securities Act,
and
any commission paid, or any discounts or concessions allowed to, any such
broker-dealer may be deemed to be underwriting commissions or discounts under
the Securities Act. At the time a particular offering of the shares of common
stock is made, a prospectus supplement, if required, will be distributed which
will set forth the aggregate amount of shares of common stock being offered
and
the terms of the offering, including the name or names of any broker-dealers
or
agents, any discounts, commissions and other terms constituting compensation
from the selling stockholders and any discounts, commissions or concessions
allowed or reallowed or paid to broker-dealers.
Under
the
securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition,
in
some states the shares of common stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There
can
be no assurance that the selling stockholders will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.
We
are
required to pay all fees and expenses incident to the registration of the
shares, but we will not receive any proceeds from the sale of the common stock.
We have agreed to indemnify the selling stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities
Act.
EXPERTS
The
consolidated financial statements of Telkonet incorporated by reference in
this
prospectus from our Form 10-K for the year ended December 31, 2006 have
been audited by Russell Bedford Stefanou Mirchandani LLP, independent certified
public accountants, and have been incorporated herein by reference in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
LEGAL
MATTERS
An
opinion has been rendered by the law firm of Baker & Hostetler LLP to the
effect that the shares of our common stock offered by the selling stockholders
under this prospectus are legally issued, fully paid and non-assessable.
INFORMATION
INCORPORATED BY REFERENCE
The
SEC
allows us to incorporate by reference the information we file with the SEC,
which means that we can disclose important information to you by referring
to
another document filed separately with the SEC. The information that we file
with the SEC after the date of this prospectus will automatically update and
supersede this information. We incorporate by reference into this prospectus
the
documents listed below and any future filings we make with the SEC under
sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as
amended, until all of the shares of our common stock offered by this prospectus
are sold.
|
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•
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Annual
Report on Form 10-K for the year ended December 31, 2006, filed on
March 16, 2007;
|
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•
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Quarterly
Reports on Form 10-Q for the quarterly period ended March 31, 2007
(filed
on May 10, 2007);
|
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•
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Current
Reports on Form 8-K filed on March 19, 2007 and April 23,
2007;
|
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•
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The
description of our common stock contained in our registration statement
on
Form 10-SB, filed on September 13,
1999.
|
All
documents we file with the SEC from the date of this prospectus until all of
the
shares offered under this prospectus are sold shall also be deemed to be
incorporated herein by reference.
Any
statement contained in a document incorporated or considered to be incorporated
by reference into this prospectus shall be considered to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any subsequently filed document that is
or is
considered to be incorporated by reference modifies or supersedes such
statement. Any statement that is modified or superseded shall not, except as
so
modified or superseded, constitute a part of this prospectus.
You
may
request a copy of any of the documents that are incorporated by reference into
this prospectus, other than exhibits that are not specifically incorporated
by
reference into such documents, and our certificate of incorporation and bylaws,
at no cost, by writing or telephoning us at the following address:
Corporate
Secretary
Telkonet,
Inc.
20374
Seneca Meadows Parkway
Germantown,
Maryland 20876
(240) 912-1800
WHERE
YOU CAN FIND MORE INFORMATION
We
are
subject to the informational requirements of the Securities Exchange Act of
1934
pursuant to which we file reports and other information with the SEC. These
reports and other information may be inspected and copied at public reference
facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington,
DC 20549 and at the SEC’s Regional Office at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies may be obtained at
prescribed rates from the Public Reference Section of the SEC at its principal
office in Washington, D.C. The SEC also maintains an internet web site that
contains periodic and other reports, proxy and information statements and other
information regarding registrants, including us, that file electronically with
the SEC. The address of the SEC’s web site is http://www.sec.gov.
All
information concerning us contained in this prospectus has been furnished by
us.
No person is authorized to make any representation with respect to the matters
described in this prospectus other than those contained in this prospectus
and
if given or made must not be relied upon as having been authorized by us or
any
other person.
We
have
not authorized anyone to give any information or make any representation about
our company that is different from, or in addition to, that contained in this
prospectus. Therefore, if anyone gives you such information, you should not
rely
on it. This prospectus is dated _________, 2007. You should not assume that
the
information contained in this document is accurate as of any other date unless
the information specifically indicates that another date applies.
DISCLOSURE
OF SEC POSITION ON INDEMNIFICATION OF SECURITIES ACT
LIABILITIES
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted for directors, officers or persons controlling the registrant
pursuant to applicable state law, the registrant has been informed that, in
the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 14. Other
Expenses of
Issuance and Distribution.
The
following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities being registered, all of which
are
being borne by the registrant.
|
|
|
|
|
|
Securities
and Exchange Commission Registration Fee
|
|
$
|
295
|
|
|
Accounting
Fees and Expenses
|
|
$
|
6,000
|
|
|
Legal
Fees and Expenses
|
|
$
|
6,000
|
|
|
Printing
Fees and Expenses
|
|
$
|
2,000
|
|
|
Miscellaneous
|
|
$
|
1,000
|
|
|
|
|
|
|
Total
|
|
$
|
15,295
|
|
|
Item 15. Indemnification
of
Directors and Officers.
Reference
is made to Section 16-10a-902 of the Utah Business Corporation Act, which
enables a corporation to indemnify an individual made a party to a proceeding
because he is or was a director of Telkonet if (i) his conduct was in good
faith, (ii) he reasonably believed his conduct was in, or not opposed to,
the corporation’s best interests, and (iii) in the case of a criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Notwithstanding the foregoing, a corporation may not indemnify a director
(a) in connection with a proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation, or (b) in
connection with any other proceeding charging that the director derived an
improper personal benefit, whether or not involving action in his official
capacity, in which proceeding he was adjudged liable on the basis that he
derived an improper personal benefit. The Utah Business Corporation Act also
permits Telkonet to purchase insurance on behalf of any person that is or was
a
director, officer, employee, fiduciary or agent of Telkonet. Telkonet’s amended
and restated articles of incorporation provide in effect for the elimination
of
the personal liability of Telkonet’s directors and for the indemnification by
Telkonet of each director and officer of Telkonet, in each case, to the fullest
extent permitted by applicable law. Telkonet purchases and maintains insurance
on behalf of any person who is or was a director, officer, employee, fiduciary
or agent of Telkonet against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her status
as such, whether or not Telkonet would have the power or the obligation to
indemnify him or her against such liability under the provisions of Telkonet’s
amended and restated articles of incorporation.
Item 16. Exhibits.
|
|
|
|
|
Exhibit
Number
|
|
Description
of Exhibits
|
| |
|
|
|
4
|
|
Form
of Warrant to Purchase Common Stock
|
| |
|
|
|
5
|
|
Opinion
of Baker & Hostetler LLP as to the validity of the issuance of
the common stock of Telkonet, Inc. being registered
|
| |
|
|
|
10.1
|
|
Asset
Purchase Agreement, dated February 23, 2007, by and between Telkonet,
Inc.
and Smart Systems International (incorporated by reference to our
Current
Report on Form 8-K filed on March 2, 2007)
|
|
|
|
|
|
10.2
|
|
Registration
Rights Agreement, dated February 23, 2007, by and between Telkonet,
Inc.
and Smart Systems International
|
| |
|
|
|
10.3
|
|
Engagement
letter, dated January 8, 2007, between Telkonet, Inc. and Bryant
Park
Capital
|
| |
|
|
|
23.1
|
|
Consent
of Russell Bedford Stefanou Mirchandani LLP relating to the financial
statements of Telkonet, Inc.
|
|
|
|
|
|
23.2
|
|
Consent
of Baker & Hostetler LLP (included in
Exhibit 5)
|
|
|
|
|
|
24
|
|
Power
of Attorney (included on signature
page)
|
Item 17. Undertakings
(a) The
undersigned registrant hereby undertakes:
(1) To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
|
|
|
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and
Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in
volume and price represent no more than a 20 percent change in the
maximum
aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement; and
|
|
|
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
|
provided,
however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) shall not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the
Securities and Exchange Commission by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by
reference in the registration statement, or that is contained in a form of
prospectus filed pursuant to Rule 424(b) that is part of the registration
statement.
(2) That,
for
the purpose of determining any liability under the Securities Act of 1933,
each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering
thereof.
(3) To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be
the initial bona
fide offering
thereof.
(c) Insofar
as
indemnification for liabilities arising under the Securities Act of 1933 may
be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, Telkonet, Inc. has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Germantown, State of
Maryland, on the 15th day of May, 2007.
|
|
TELKONET,
INC.
|
|
|
By:
|
/s/
Ronald W. Pickett
|
|
|
|
Ronald
W. Pickett
|
|
|
|
Chief
Executive Officer
|
KNOW
ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Richard J. Leimbach and Ronald W. Pickett, or either
of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead,
in
any and all capacities, to sign any and all post-effective amendments to this
registration statement, and to file the same with all exhibits hereto, and
other
documents in connection herewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all
that said attorneys-in-fact and agents, or any of them, or their or his
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed on May 15, 2007 by the following persons in the capacities
indicated below.
|
Signature
|
|
Title
|
|
|
|
|
|
|
|
/s/
Ronald W. Pickett
|
|
President,
Chief Executive Officer and Director
(Principal
Executive Officer)
|
|
|
Ronald
W. Pickett
|
|
|
|
|
|
|
|
|
|
/s/
Richard J. Leimbach
|
|
Vice
President Finance
(Principal
Financial and Principal Accounting Officer)
|
|
|
Richard
J. Leimbach
|
|
|
|
|
|
|
|
|
|
/s/
Warren V. Musser
|
|
Chairman
of the Board of Directors
|
|
|
Warren
V. Musser
|
|
|
|
|
|
|
|
|
|
/s/
Thomas M. Hall
|
|
Director
|
|
|
Thomas
M. Hall
|
|
|
|
|
|
|
|
|
|
/s/
Thomas C. Lynch
|
|
Director
|
|
|
Thomas
C. Lynch
|
|
|
|
|
|
|
|
|
|
/s/
James L. Peeler
|
|
Director
|
|
|
James
L. Peeler
|
|
|
|
|
|
|
|
|
|
/s/
Seth Blumenfeld
|
|
Director
|
|
|
Seth
Blumenfeld
|
|
|
|
| |
|
|
|
|
/s/
Anthony Paoni
|
|
Director
|
|
|
Anthony
Paoni
|
|
|
|
EXHIBIT
INDEX
|
Exhibit
Number
|
|
Description
of Exhibits
|
| |
|
|
|
4
|
|
Form
of Warrant to Purchase Common Stock
|
| |
|
|
|
5
|
|
Opinion
of Baker & Hostetler LLP as to the validity of the issuance of
the common stock of Telkonet, Inc. being registered
|
| |
|
|
|
10.1
|
|
Asset
Purchase Agreement, dated February 23, 2007, by and between Telkonet,
Inc.
and Smart Systems International (incorporated by reference to our
Current
Report on Form 8-K filed on March 2, 2007)
|
|
|
|
|
|
10.2
|
|
Registration
Rights Agreement, dated February 23, 2007, by and between Telkonet,
Inc.
and Smart Systems International
|
| |
|
|
|
10.3
|
|
Engagement
letter, dated January 8 2007, between Telkonet, Inc. and Bryant Park
Capital
|
|
|
|
|
|
23.1
|
|
Consent
of Russell Bedford Stefanou Mirchandani LLP relating to the financial
statements of Telkonet, Inc.
|
|
|
|
|
|
23.2
|
|
Consent
of Baker & Hostetler LLP (included in
Exhibit 5)
|
|
|
|
|
|
24
|
|
Power
of Attorney (included on signature
page)
|
17