As filed with the Securities and Exchange Commission on April 20, 2004
Registration No. 333-114425
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TELKONET, INC.
(Exact Name of Registrant as Specified in Its Charter)
UTAH 87-0627421
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
20374 SENECA MEADOWS PARKWAY
GERMANTOWN, MARYLAND 20876
(410) 897-5900
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Principal Executive Offices)
---------------
Ronald W. Pickett
Chief Executive Officer
20374 Seneca Meadows Parkway
Germantown, Maryland 20876
(Name and Address of Agent for Service)
(410) 897-5900
(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. [ ]
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. [x]
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. [ ] ______________________________
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. [ ]
_______________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED UNIT OFFERING PRICE REGISTRATION FEE
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Common Stock,
$0.001 par value 15,560,495 $ 5.11 (1) $79,514,129 (1) $10,075 (2)
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
(1) Estimated in accordance with Rule 457 solely for the purpose of determining
the registration fee.
(2) $10,054 of this filing fee was paid on April 13, 2004 in connection with the
filing of the Company's Registration statement on Form S-3 (No. 333-114425).
PROSPECTUS
TELKONET, INC.
15,560,495 Shares
Common Stock
This prospectus covers 15,560,495 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.
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 traded on the American Stock Exchange under the
symbol "TKO." On April 16, 2004, the last reported sale price of our common
stock was $4.30.
INVESTING IN SHARES OF OUR COMMON STOCK INVOLVES RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
Neither the Securities and Exchange Commission 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.
-----------------
The date of this prospectus is April 20, 2004.
TABLE OF CONTENTS
Page
----
The Company 1
Risk Factors 4
Forward-Looking Statements 9
Use of Proceeds 9
Selling Stockholders 9
Plan of Distribution 14
Experts 15
Legal Matters 15
Incorporation By Reference 15
Where You Can Find More Information 16
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.
OVERVIEW
Telkonet, Inc. was formed in 1999 to develop products for use in the
powerline communications (PLC) industry. PLC products use existing electrical
wiring in commercial buildings and residences to carry high speed data
communications signals, including the Internet. Since Telkonet's formation, it
has worked on the development and marketing of its PLC technology.
Telkonet's PLC technology, the "PlugPlus(TM)" product suite, consists
of three separate components, the Gateway, the Coupler and the iBridge. The
Gateway, the hub of the PlugPlus(TM) product suite, is a modular, self-contained
unit that accepts data from an existing network on one port and distributes it
via a second port. The Gateway integrates a communications processor that runs a
series of proprietary applications under Linux. The signal generated by the
Gateway can be directly coupled into low voltage wiring via the Coupler, which
interfaces directly between the Gateway and the building's electrical panel.
Multi-panel buildings typically require multiple Couplers, which are connected
to the Gateway via inexpensive coaxial cable and concentrated using standard
radio frequency splitters. A suite of software applications running on the
Gateway can perform communications functions or system management functions. The
iBridge serves as the user's network access device and connects to a user's
personal computer through a standard Ethernet cable. The iBridge's AC line cord
serves as its power source as well as its network interface. Telkonet also
offers the eXtender, a fourth optional device, as part of its PlugPlus(TM)
product suite. The eXtender is used to extend the reach of the Gateway in larger
buildings or campus environments.
The PlugPlus(TM) product suite delivers data to the user at speeds in
excess of 7 Mega bits per second (Mbps), with burst speeds of 12.6 Mbps. The
PlugPlus(TM) product suite is installed by connecting an incoming broadband
signal (DSL, TL, satellite or cable modem) into the Gateway and connecting the
Gateway to a building's electrical panel using one or more Couplers. Once
installed, the Gateway distributes the high-speed Internet signal throughout the
entire existing network of electrical wires within the building. The user may
access a high-speed Internet signal by plugging the iBridge into any electrical
outlet and connecting a personal computer to the iBridge using the computer's
built-in Ethernet port. Multiple personal computers connected to the iBridge can
communicate with one another and can share a single broadband resource via the
Gateway.
In September 2002, Telkonet confirmed through an independent, Federal
Communications Commission (FCC) certified testing lab that its PLC product line
meets the FCC technical requirements for Class A digital devices. In June 2003,
Telkonet confirmed that its PLC product line also meets the requirements for
Class B digital devices. As a result, no further testing of these products is
required and the devices may be manufactured and marketed for commercial or
residential use. The FCC permits 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.
1
Telkonet has applied for patents that cover its unique technology and
has utilized the recently announced advancements in transmission speeds to build
its next generation of products that will be launched into the hospitality
market. Telkonet continues to identify, design and develop enhancements to its
core technologies that will provide additional functionality, diversification of
application and desirability for current and future users. Telkonet intends to
protect this intellectual property by filing additional patent applications.
In September 2003, Telkonet received approval from the U.S. Patent and
Trademark Office for its "Method and Apparatus for Providing Telephonic
Communication Services" patent. Notwithstanding the issuance of this patent,
there can be no assurance that any of Telkonet's current or future patent
applications will be granted, or, if granted, that such patents will provide
necessary protection for Telkonet's technology or its product offerings, or be
of commercial benefit to Telkonet.
During the years ended December 31, 2003 and 2002, the Company spent
$1,370,785 and $1,279,145 on research and development activities, respectively.
The primary developments arising from these research and development efforts
included improved network reach with the introduction of Telkonet's secondary
gateway, the introduction of an encrypted key-change-over-powerline feature to
ease security management, an improved ability to remotely monitor network status
and the addition of a VLAN support function for enhanced integration with
subscriber management and billing systems. Telkonet's current focus is the
reduction of total solution cost and improved performance, streamlined
installation and a reduction in the time and cost of installation and developing
a low-cost "plug and play" system for home networking applications.
Telkonet is a member of the HomePlug(TM) Powerline Alliance, an
industry trade group that engages in marketing and educational initiatives, and
sets standards and specifications for products, in the powerline communications
industry.
Telkonet's principal executive offices are located at 20374 Seneca
Meadows Parkway, Germantown, Maryland 20876.
RECENT DEVELOPMENTS
On January 24, 2004, Telkonet's common stock was listed for trading on
the American Stock Exchange under the ticker symbol "TKO." Prior to January 24,
2004, Telkonet's common stock was quoted on the OTC Bulletin Board under the
symbol "TLKO.OB."
On February 18, 2004, Telkonet completed a private offering of its
common stock resulting in net proceeds to Telkonet of approximately $12.8
million. The Company sold 6,387,600 shares of its common stock in the private
offering at a price equal to the average closing price per share over the 30
trading days ending February 5, 2004, discounted by 18.0%. CDC Securities, Inc.
acted as Telkonet's placement agent in the transaction. CDC Securities is an
indirect subsidiary of the French bank CDC IXIS. The shares of Telkonet common
stock sold in the private offering are included in the registration statement of
which this prospectus forms a part.
2
On April 15, 2004 the Company relocated its principal executive offices
to 20374 Seneca Meadows Parkway, Germantown, Maryland 20876. The Company has
executed a sub-lease agreement through November 2010 for approximately 11,600
square feet of commercial office space. The Company is responsible for an
allocated portion of the build-out cost of the Germantown facility. The Company
anticipates that it will spend approximately $400,000 in connection with this
relocation, which includes aggregate build-out costs, security deposit, office
furniture and telephone equipment. As of December 31, 2003, the Company has
incurred approximately $50,000 in build-out costs and has paid to the landlord
approximately $70,000 as a security deposit for the Germantown facility.
3
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.
TELKONET IS EMERGING FROM ITS DEVELOPMENT STAGE AND HAS NO OPERATING HISTORY ON
WHICH TO BASE AN EVALUATION OF ITS CURRENT BUSINESS AND FUTURE PROSPECTS.
Telkonet is emerging from its development stage. As a result, it has no
operating history upon which to base an evaluation of its current business and
future prospects. The first PlugPlus(TM) product was introduced in July 2001.
Since our formation, have not generated substantial revenues. Moreover, we do
not currently have any contracts in place that will provide any significant
revenue. Because of our lack of an operating history, management has limited
insight into trends that may emerge and could materially adversely affect our
business. Prospective investors should consider the risks and difficulties our
company may encounter in its new and rapidly evolving market, especially given
our lack of operating history. These risks include our ability to:
o market the PlugPlus(TM)product suite;
o build a customer base;
o generate revenues;
o compete favorably in a highly competitive market;
o access sufficient capital to support growth;
o recruit and retain qualified employees;
o introduce new products and services; and
o build technology and support systems.
WE HAVE A HISTORY OF OPERATING LOSSES AND AN ACCUMULATED DEFICIT AND WE EXPECT
TO CONTINUE TO INCUR LOSSES FOR THE FORESEEABLE FUTURE.
Since inception through December 31, 2003, we have incurred cumulative
losses of $14,116,612 and have never generated enough funds through our
operations to support our business. We expect to continue to incur substantial
operating losses through 2004. Our losses to date have resulted principally
from:
o research and development costs relating to the development of
our PlugPlus(TM)product suite;
o costs and expenses associated with manufacturing, distribution
and marketing of our products;
4
o general and administrative costs relating to our operations;
and
o interest expense related to our Series A and Series B
Debentures and our Senior Notes.
We are currently unprofitable and may never become profitable. Since
inception, we have funded our research and development activities primarily from
private placements of equity and debt securities, a bank loan and short term
loans from certain of our executive officers. As a result of our substantial
research and development expenditures and limited product revenues, we have
incurred substantial net losses. Our ability to achieve profitability will
depend primarily on our ability to successfully commercialize the PlugPlus(TM)
product suite.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS COULD HAVE A NEGATIVE EFFECT ON THE
PRICE OF OUR COMMON STOCK.
Our operating results may fluctuate significantly in the future as a
result of a variety of factors, most of which are outside our control,
including:
o the level of use of the Internet;
o the demand for high-tech goods;
o the amount and timing of capital expenditures and other costs
relating to the expansion of our operations;
o price competition or pricing changes in the industry;
o technical difficulties or system downtime;
o economic conditions specific to the internet and
communications industry; and
o general economic conditions.
Our 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 results for any
quarter and have a negative impact on the price of our common stock.
OUR DIRECTORS AND EXECUTIVE OFFICERS OWN A SUBSTANTIAL PERCENTAGE OF OUR ISSUED
AND OUTSTANDING COMMON STOCK. THEIR OWNERSHIP COULD ALLOW THEM TO EXERCISE
SIGNIFICANT CONTROL OVER CORPORATE DECISIONS.
As of December 31, 2003, our officers and directors owned 24.6% of our
common stock. This means that our officers and directors, as a group, exercise
significant control over matters upon which our stockholders may vote, including
the selection of the Board of Directors, mergers, acquisitions and other
significant corporate transactions.
5
FURTHER ISSUANCES OF EQUITY SECURITIES MAY BE DILUTIVE TO CURRENT STOCKHOLDERS.
Although the funds raised in our private placement of debt and equity
securities are being used for general working capital purposes, it is likely
that we 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 our common stock. Any issuance of
additional shares of our common stock will be dilutive to existing stockholders
and could adversely affect the market price of our common stock.
THE EXERCISE OF OPTIONS AND WARRANTS OUTSTANDING AND AVAILABLE FOR ISSUANCE MAY
ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
As of December 31, 2003, we had outstanding employee options to
purchase a total of 8,293,000 shares of common stock at exercise prices ranging
from $1.00 to $3.68 per share, with a weighted average exercise price of $1.19.
As of December 31, 2003, the Company had outstanding non-employee options to
purchase a total of 3,267,500 shares of common stock at an exercise price of
$1.00 per share. As of December 31, 2003, we had warrants outstanding to
purchase a total of 5,159,490 shares of common stock at exercise prices ranging
from $0.53 to $2.97 per share, with a weighted average exercise price of $1.01.
In addition, as of December 31, 2003, we had 3,439,500 additional shares of
common stock which may be issued in the future under the Telkonet, Inc. Stock
Incentive Plan. 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 our common
stock.
THE POWERLINE COMMUNICATIONS INDUSTRY IS INTENSELY COMPETITIVE AND RAPIDLY
EVOLVING.
We operate in a highly competitive, quickly changing environment, and
our future success depends on our ability to develop and introduce new products
and product enhancements that achieve broad market acceptance in commercial and
governmental sectors. Our future success will depend, in large part, upon our
ability to identify demand trends in the commercial and governmental sectors and
quickly develop, manufacture and sell products that satisfy these demands in a
cost effective manner. We 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:
o loss of or delay in revenue and loss of market share;
o negative publicity and damage to our reputation and brand; and
o decline in the average selling price of our products.
GOVERNMENT REGULATION OF OUR PRODUCTS COULD IMPAIR OUR 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
6
B" devices intended for residential use to which more stringent standards apply.
An independent, FCC-certified testing lab has verified that our PlugPlus(TM)
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 us 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 our ability
to sell our products in certain markets and could have a negative impact on our
business and results of operations.
PRODUCTS SOLD BY OUR COMPETITORS COULD BECOME MORE POPULAR THAN OUR PRODUCTS OR
RENDER OUR PRODUCTS OBSOLETE.
The market for powerline communications products is highly competitive.
Although we are presently the only company marketing PLC products to the
commercial segment, Linksys Group, Inc. and Netgear, Inc. offer similar PLC
solutions for the residential market. There can be no assurance that Linksys
Group, Netgear or any other company will not develop PLC products that compete
with our products in the future. 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 we can. As a result, we 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 us or that would render our products obsolete or noncompetitive. We
anticipate that potential competitors will also intensify their efforts to
penetrate our 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 we do. These companies could
devote more capital resources to develop, manufacture and market competing
products than we could. If any of these companies are successful in competing
against us, our sales could decline, our margins could be negatively impacted,
and we could lose market share, any of which could seriously harm our 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 OUR RESULTS OF OPERATIONS.
Our 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 our results of
operations.
7
FAILURE OF OUR SERVICES AND PRODUCTS TO BE SUCCESSFUL IN THE MARKETPLACE COULD
HAVE A NEGATIVE EFFECT ON OUR RESULTS OF OPERATIONS.
Since we are just emerging from our development stage, we do not know
with any certainty whether our services and/or products will be accepted within
the business marketplace. If our services and/or products prove to be
unsuccessful within the marketplace, or if we fail to attain market acceptance,
it could have a negative effect on our results of operations.
WE MAY NOT BE ABLE TO OBTAIN PATENTS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS.
Our ability to compete effectively in the powerline technology industry
will depend on our success in acquiring suitable patent protection. We also have
several patents pending. We intend to file additional patent applications that
we deem to be economically beneficial. If we are not successful in obtaining
patents, or protecting issued patents against infringement, we will have limited
protection against those who might copy our technology. As a result, the failure
to obtain and defend patents could negatively impact our business and results of
operations. In September 2003, Telkonet received approval from the U.S. Patent
and Trademark Office for its "Method and Apparatus for Providing Telephonic
Communication Services" patent. Notwithstanding the issuance of this patent,
there can be no assurance that any of Telkonet's current or future patent
applications will be granted, or, if granted, that such patents will provide
necessary protection for Telkonet's technology or its product offerings, or be
of commercial benefit to Telkonet.
INFRINGEMENT BY THIRD PARTIES ON OUR PROPRIETARY TECHNOLOGY AND DEVELOPMENT OF
SUBSTANTIALLY EQUIVALENT PROPRIETARY TECHNOLOGY BY OUR COMPETITORS COULD
NEGATIVELY IMPACT OUR BUSINESS.
Our success depends partly on our 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 we have taken to protect our intellectual property, including
those integrated to our PlugPlus(TM) 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 our
existing patents, or any patents that may be issued in the future, will provide
us with significant protection against competitors. Moreover, there can be no
assurance that any patents issued to, or licensed by, us will not be infringed
upon or circumvented by others. Infringement by third parties on our proprietary
technology could negatively impact our business. 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 our favor. We also rely 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 we can meaningfully protect our rights to such
unpatented proprietary technology. Development of substantially equivalent
technology by our competitors could negatively impact our business.
WE DEPEND ON A SMALL TEAM OF SENIOR MANAGEMENT, AND WE MAY HAVE DIFFICULTY
ATTRACTING AND RETAINING ADDITIONAL PERSONNEL.
Our future success will depend in large part upon the continued
services and performance of senior management and other key personnel. If we
lose the services of any member of our senior management team, our overall
operations could be materially and adversely affected. In addition, our future
success will depend on our ability to identify, attract, hire, train, retain and
motivate other highly skilled technical, managerial, marketing, purchasing and
8
customer service personnel when they are needed. Competition for these
individuals is intense. We cannot ensure that we 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 our financial condition and results of operations.
FORWARD-LOOKING STATEMENTS
This prospectus and any prospectus supplement 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
within the meaning of Section 27(A) of the Securities Act of 1933 and Section
21(F) of the Securities Exchange Act of 1934. For such statements, we claim the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. 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
stockholders.
SELLING STOCKHOLDERS
The following table provides certain information regarding the selling
stockholder's beneficial ownership of our common stock prior to and after the
offering. The aggregate number of shares in this offering constitutes 36.0% of
our issued and outstanding shares of common stock. Beneficial ownership is
determined under the Securities and Exchange Commission's rules, and generally
includes voting or investment power with respect to securities. Except where
otherwise indicated, each of the following selling stockholders exercises sole
voting and investment control over the shares of our common stock owned by them.
9
NUMBER OF NUMBER OF NUMBER OF
SHARES OWNED SHARES BEING SHARES OWNED
PRIOR TO THE OFFERED FOR AFTER THE PERCENTAGE
SELLING STOCKHOLDER OFFERING SALE OFFERING OF CLASS
------------------- -------- ---- -------- --------
A. Boardman Oil Company (1) 10,000 10,000 0 0%
Cynthia S. Abshire 12,551 12,551 0 0%
Robert Abshire 5,000 5,000 0 0%
Michael and Maria Accattato 30,000 30,000 0 0%
Activest Investmentgsellschaft S.A. (2) 300,000 300,000 0 0%
AG United (3) 20,000 20,000 0 0%
Augusta Cardiology Clinic (4) 94,761 94,761 0 0%
Faisal Alhegelan 45,000 45,000 0 0%
Burgess M. Allen, Jr. 14,498 14,498 0 0%
Henry Alperin 92,068 92,068 0 0%
Mark D. Anderson 3,500 3,500 0 0%
Ozcan Ardan 5,116 5,116 0 0%
Wendel B. Ardrey 10,000 10,000 0 0%
Kerry Armbruster 45,942 45,942 0 0%
Tonya C. Armstrong 4,000 4,000 0 0%
Sonan L. Ashley 71,685 71,685 0 0%
Linda Attkisson 1,585 1,585 0 0%
Ronald Attkisson 46,412 46,412 0 0%
Attkisson Carter & Co. 32,930 32,930 0 0%
Asymmetric Communications Ltd. (5) 25,000 25,000 0 0%
Burton B. Barmore 20,471 20,471 0 0%
Bryan W. and Laura A. Baughman 7,212 7,212 0 0%
Bayern-Invest Kapitalanlagegesellschaft mbH (6) 1,100,000 1,100,000 0 0%
Rod K. Beckstead 17,600 17,600 0 0%
Matthew K. Beckstead Revocable Trust (7) 63,333 63,333 0 0%
Berkin Business S.A. (8) 47,619 47,619 0 0%
Valerie Biskey 26,347 26,347 0 0%
Horace G. Blalock 47,050 47,050 0 0%
J. Dickey Boardman, Jr. 2,500 2,500 0 0%
Robert L. Bower 20,000 20,000 0 0%
Barbara Sue Bramlett 10,471 10,471 0 0%
Jackie Brooks 107,809 107,809 0 0%
Barry S. Bryant 14,552 14,552 0 0%
Nasir Ali Shah Bukhari 50,000 50,000 0 0%
Carolyn H. Byrd 47,619 47,619 0 0%
Patsy D. Clayton 5,000 5,000 0 0%
Thomas E. Clayton 377 377 0 0%
Clayton Reed Shop (9) 13,000 13,000 0 0%
Bryan Coats 5,000 5,000 0 0%
I.R. Collier 6,000 6,000 0 0%
Edward A. Corley 59,037 59,037 0 0%
William D. Corley 32,116 32,116 0 0%
James Cosper 1,107 1,107 0 0%
John R. Cralle 20,000 20,000 0 0%
10
NUMBER OF NUMBER OF NUMBER OF
SHARES OWNED SHARES BEING SHARES OWNED
PRIOR TO THE OFFERED FOR AFTER THE PERCENTAGE
SELLING STOCKHOLDER OFFERING SALE OFFERING OF CLASS
------------------- -------- ---- -------- --------
Crestview Capital Fund II L.P. (10) 128,571 128,571 0 0%
Crestview Capital Offshore Fund Inc. (11) 14,285 14,285 0 0%
CrossHill Georgetown Capital (12) 250,000 250,000 0 0%
Andrew and Patricia D'Angelo 5,000 5,000 0 0%
Charles W. Daniel 57,350 57,350 0 0%
Dawnglen Finance Ltd. (13) 100,000 100,000 0 0%
Anthony H. and Julie P. DeCesaris (14) 1,175,000 1,175,000 0 0%
Anthony DeCesaris, Jr. 22,000 22,000 0 0%
Joseph A. DeCesaris 533 533 0 0%
Amy Dickson 3,500 3,500 0 0%
Milton O. Dickson, Jr. 3,500 3,500 0 0%
Dicoronia Capital Ventures Ltd. (15) 114,000 114,000 0 0%
Tommy Duncan 47,619 47,619 0 0%
Barry Dunn 54,942 54,942 0 0%
William A. Dunn 70,942 70,942 0 0%
J. Martin Echols, Jr. 119,800 119,800 0 0%
Robert Edmond 34,533 34,533 0 0%
Ehrenkrantz King Nussbaum (16) 137,000 137,000 0 0%
EPM AG (17) 47,619 47,619 0 0%
EPM Holding AG (18) 47,619 47,619 0 0%
Fred C. Applegate Trust (19) 250,000 250,000 0 0%
Imre Eszenyi 115,400 115,400 0 0%
Lenora Evans 50,000 50,000 0 0%
Fridolin Fackelmayer 75,000 75,000 0 0%
Dorth G. Falls 14,000 14,000 0 0%
Frank A. Farnesi 11,904 11,904 0 0%
Frank and Marie Farnesi 31,250 31,250 0 0%
Edward J. Farrell 312,500 312,500 0 0%
Robert J. Ferrara 41,413 41,413 0 0%
First Mirage, Inc. (20) 47,619 47,619 0 0%
Patsy A. Fisher 14,871 14,871 0 0%
Kurt Friemann 47,619 47,619 0 0%
Generation Capital Associates (21) 70,000 70,000 0 0%
Joseph Gil 12,000 12,000 0 0%
Donna Michelle Godwin Trust (22) 500 500 0 0%
Donald M. Gleklen 43,154 43,154 0 0%
Donnie W. Guy 23,000 23,000 0 0%
Thomas M. Hall 156,094 156,094 0 0%
Richard A. Hansen 312,500 312,500 0 0%
Franklin D. Hart, Jr. 30,707 30,707 0 0%
Robert F. Heishman 20,000 20,000 0 0%
James A. Hendrickson 97,619 97,619 0 0%
High Capital Funding, LLC (23) 71,428 71,428 0 0%
James H. Hillis, Jr. 20,000 20,000 0 0%
Lynn Hitschler 125,000 125,000 0 0%
Hitschler Enterprises LLC (24) 500,000 500,000 0 0%
Judith D. Hollington 14,500 14,500 0 0%
Larry N. Hollington 20,533 20,533 0 0%
A. Louis Hook, Jr. 10,471 10,471 0 0%
Kenneth S. Hudson 16,466 16,466 0 0%
INKA Internationale Kapitalanlagegesellschaft mbH (25) 1,600,000 1,600,000 0 0%
Investor Stock Daily, Inc. (26) 49,998 49,998 0 0%
ITF Mauritius (27) 50,000 50,000 0 0%
Faye S. Jennings 10,000 10,000 0 0%
David E. Jones 1,500 1,500 0 0%
Glen E. Jones 25,000 25,000 0 0%
J. Pope Jones 160,484 160,484 0 0%
J. Pope and Gail W. Jones 4,000 4,000 0 0%
Richard L. Keller 5,236 5,236 0 0%
James R. Kelley 20,198 20,198 0 0%
Nancy Kines 20,942 20,942 0 0%
Langtry Trust Group (28) 125,000 125,000 0 0%
H.F. Lenfest 431,547 431,547 0 0%
Joanne Leonard 2,600 2,600 0 0%
Tom Leonard 23,407 23,407 0 0%
James T. Lewis 52,356 52,356 0 0%
Nancy P. Locklear 15,707 15,707 0 0%
11
NUMBER OF NUMBER OF NUMBER OF
SHARES OWNED SHARES BEING SHARES OWNED
PRIOR TO THE OFFERED FOR AFTER THE PERCENTAGE
SELLING STOCKHOLDER OFFERING SALE OFFERING OF CLASS
------------------- -------- ---- -------- --------
Dianne H. Lollis 5,500 5,500 0 0%
Hoyt G. Lowder 95,238 95,238 0 0%
Howard and Barbara Lubert 100,000 100,000 0 0%
Earl H. Marshall 20,000 20,000 0 0%
Phillip R. Mason 160,471 160,471 0 0%
Joseph H. May 7,900 7,900 0 0%
Alice McCoy 11,900 11,900 0 0%
J. Lavern McCullough 15,707 15,707 0 0%
Cynthia L. McDonald 56,649 56,649 0 0%
Daniel and Arlene McGinnis 62,500 62,500 0 0%
M. Dixon McKay 156,742 156,742 0 0%
Meadow Ventures (29) 55,000 55,000 0 0%
Eugenia Medlock 66,413 66,413 0 0%
Kyros Melas 115,000 115,000 0 0%
Clare C. Merica 500 500 0 0%
Maria Molinski 11,904 11,904 0 0%
Louis Mulherin, Jr. 71,190 71,190 0 0%
Julian I. Murphy 10,000 10,000 0 0%
Hilary Musser 25,000 25,000 0 0%
Peter Musser, Jr. 545,238 545,238 0 0%
The Musser Foundation (30) 235,027 235,027 0 0%
Eric A. Newquist 500 500 0 0%
Oxa Trade & Finance Ltd. (31) 100,000 100,000 0 0%
P&V Assurances SC (32) 250,000 250,000 0 0%
John G. and Nancy Lee Page 27,762 27,762 0 0%
Andrew Panzo 18,750 18,750 0 0%
Pasquale Patrizio 17,261 17,261 0 0%
Selena J. Peregoy 5,500 5,500 0 0%
Brian K. Phelan 100,000 100,000 0 0%
Ronald W. Pickett 72,741 72,741 0 0%
Jana S. Pine 36,673 36,673 0 0%
Pogue World Fund, Ltd. (33) 100,000 100,000 0 0%
Ted A. Poore 12,000 12,000 0 0%
Randall Redmond 5,000 5,000 0 0%
Kenneth J. Remington 15,707 15,707 0 0%
Caroline T. Richardson 81,413 81,413 0 0%
Furman Terry Richardson 3,000 3,000 0 0%
Pamela K. Richardson 37,936 37,936 0 0%
Michael C. Rogers 10,000 10,000 0 0%
Michael C. and Pamela Rogers 10,000 10,000 0 0%
Orhan Sadik-Khan 78,200 78,200 0 0%
Dawn Saggus 15,707 15,707 0 0%
Kenneth D. Simpson 40,666 40,666 0 0%
Kimberly Sligh 8,233 8,233 0 0%
E. Barry Smith 38,579 38,579 0 0%
E. Barry and Donna M. Smith 20,000 20,000 0 0%
William A. Smith 20,942 20,942 0 0%
Diane J. Swiggard 38,579 38,579 0 0%
James J. and Diane J. Swiggard 20,000 20,000 0 0%
Sofaer Capital Global Hedge Fund (34) 1,000,000 1,000,000 0 0%
The Hart Organization Corp. (35) 53,809 53,809 0 0%
Thomas D. Thompson 26,942 26,942 0 0%
John W. Thurmond, III 10,000 10,000 0 0%
Rudolph and Monica Treichel 10,000 10,000 0 0%
Truk Opportunity Fund, LLC (36) 50,000 50,000 0 0%
Phoebe Tuten 5,000 5,000 0 0%
Hilton E. Vaughn, Sr. 20,942 20,942 0 0%
John R. Velky 176,000 176,000 0 0%
Gerald A. Ventresca 500 500 0 0%
Gina C. Ventresca 500 500 0 0%
Vereins-Und Westbank AG (37) 50,000 50,000 0 0%
Veritas SG Investment Trust GmbH (38) 750,000 750,000 0 0%
Geraldine N. Videtto 18,848 18,848 0 0%
WEC Partners LLC 47,619 47,619 0 0%
Jimmy L. Wilcher 15,000 15,000 0 0%
Regina Wilcher 2,000 2,000 0 0%
Laurie Wiley 21,771 21,771 0 0%
Jack T. Williams 35,602 35,602 0 0%
George M. Willson 3,000 3,000 0 0%
Ken Wilson 10,000 10,000 0 0%
Gary Winston 51,000 51,000 0 0%
I. Camille Woodruff 7,330 7,330 0 0%
12
----------------------------
(1) John Dickey Boardman, Jr. exercises direct voting and investment
control over the shares of our common stock owned by A. Boardman Oil
Company.
(2) Bruno Tretter and Dieter Beil exercise direct voting and investment
control over the shares of our common stock owned by Activest
Investmentgesellschaft S.A.
(3) Abdul Karim exercises direct voting and investment control over the
shares of our common stock owned by AG United.
(4) Brian Phelan exercises direct voting and investment control over the
shares of our common stock owned by Augusta Cardiology Clinic.
(5) A.J. Hogan exercises direct voting and investment control over the
shares of our common stock owned by Asymmetric Communications Ltd.
(6) Bernhard Kriwanek exercises direct voting and investment control over
the shares of our common stock owned by Bayern-Invest
Kapitalanlagegesellschaft mbH.
(7) Matthew K. Beckstead exercises direct voting and investment control
over the shares of our common stock owned by the Matthew K. Beckstead
Revocable Trust.
(8) Kurt Freimann exercises direct voting and investment control over the
shares of our common stock owned by Berkin Business S.A.
(9) Thomas E. Clayton exercises direct voting and investment control over
the shares of our common stock owned by Clayton Reed Shop.
(10) M.A.C. Buckley exercises direct voting and investment control over the
shares of our common stock owned by Dawnglen Finance Ltd.
(11) Richard Levy exercises direct voting and investment control over the
shares of our common stock owned by Crestview Capital Fund II LP.
(12) Richard Levy exercises direct voting and investment control over the
shares of our common stock owned by Crestview Capital Offshore Fund
Inc.
(13) Clive Barton and Kathy Gillen exercise direct voting and investment
control over the shares of our common stock owned by Dicoronia Capital
Ventures Ltd.
(14) Includes 120,000 shares of our common stock held for the benefit of
Alexandria, Gabrielle and Catherine DeCesaris and 355,000 shares of our
common stock held for the benefit of Luke Moeller DeCesaris and Jessica
Parlett DeCesaris, the DeCesaris' minor children.
(15) Anthony Ottimo exercises direct voting and investment control over the
shares of our common stock owned by Ehrenkrantz King Nussbaum.
(16) Stuart Yarbrough exercises direct voting and investment control over
the shares of our common stock owned by CrossHill Georgetown Capital.
(17) Kurt Freimann exercises direct voting and investment control over the
shares of our common stock owned by EPM AG.
(18) Kurt Freimann exercises direct voting and investment control over the
shares of our common stock owned by EPM Holding AG.
(19) Fred C. Applegate exercises direct voting and investment control over
the shares of our common stock owned by Fred C. Applegate Trust.
(20) Fred A. Brasch exercises direct voting and investment control over the
shares of our common stock owned by First Mirage, Inc.
(21) David A. Rapaport exercises direct voting and investment control over
the shares of our common stock owned by Generation Capital Associates.
(22) Gerald A. Ventresca exercises direct voting and investment control over
the shares of our common stock owned by the Donna Michelle Godwin
Trust.
(23) David A. Rapaport exercises direct voting and investment control over
the shares of our common stock owned by High Capital Funding, LLC.
(24) W. A. Hitschler exercises direct voting and investment control over the
shares of our common stock owned by Hitschler Enterprises LLC.
(25) Bert Ziberi and Bernd Franke exercise direct voting and investment
control over the shares of our common stock owned by INKA
Internationale Kapitalanlagegesellschaft mbH.
(26) Jody Janson exercises direct voting and investment control over the
shares of our common stock owned by Investor Stock Daily, Inc.
(27) Vikas Mehrotra exercises direct voting and investment control over the
shares of our common stock owned by ITF Mauritius.
(28) John Pierce and John Asplet, Directors exercises direct voting and
investment control over the shares of our common stock owned by Langtry
Trust Group.
(29) Bruce L. Evans, General Partner exercises direct voting and investment
control over the shares of our common stock owned by Meadow Ventures.
(30) Carl G. Sempier, Trustee exercises direct voting and investment control
over the shares of our common stock owned by The Musser Foundation.
13
(31) Mai Pogue exercises direct voting and investment control over the
shares of our common stock owned by Oxa Trade & Finance Ltd.
(32) Jean-Paul Lardinois has direct voting and investment control over the
shares of our common stock owned by P&V Assurances SC.
(33) Mai Pogue exercises direct voting and investment control over the
shares of our common stock owned by Pogue World Fund, Ltd.
(34) Michael Sofaer exercises direct voting and investment control over the
shares of our common stock owned by Sofaer Capital Global Hedge Fund.
(35) Frank E. Hart exercises direct voting and investment control over the
shares of our common stock owned by The Hart Organization Corp.
(36) Michael E. Fein exercises direct voting and investment control over the
shares of our common stock owned by Truk Opportunity Fund, LLC.
(37) Arnold Amsinck exercises directing voting and investment control over
the shares of our common stock owned by Vereins-Und Westbank AG.
(38) Ralf Freiherr von Ziegesar exercises directing voting and investment
control over the shares of our common stock owned by Veritas SG
Investment Trust GmbH.
PLAN OF DISTRIBUTION
The selling stockholders, or their pledgees, donees, transferees or
other successors in interest may, from time to time, sell all or a portion of
the shares at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated
prices. The selling stockholders may offer their shares at various times in one
or more of the following transactions:
o on any national securities exchange, or other market on which
our common stock may be listed at the time of sale;
o in the over-the-counter market;
o through block trades in which the broker or dealer so engaged
will attempt to sell the shares as agent, but may position and
resell a portion of the block as principal to facilitate the
transaction;
o through purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to
this prospectus;
o in ordinary brokerage transactions and transactions in which
the broker solicits purchasers;
o through options, swaps or derivatives;
o in privately negotiated transactions;
o in transactions to cover short sales; and
o through a combination of any such methods of sale.
In addition, the selling stockholders may also sell their shares that
qualify for sale pursuant to Rule 144 under the Securities Act of 1933 under the
terms of such rule rather than pursuant to this prospectus.
The selling stockholders may sell their shares directly to purchasers
or may use brokers, dealers, underwriters or agents to sell their shares upon
terms and conditions that will be described in the applicable prospectus
supplement. In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions, discounts or concessions from a selling
stockholder or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser in amounts to be negotiated. Such compensation
may, but is not expected to, exceed that which is customary for the types of
transactions involved. Broker-dealers may agree with a selling stockholder to
sell a specified number of such shares at a stipulated price per share, and, to
the extent such broker-dealer is unable to do so acting as agent for a selling
stockholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to the selling stockholders. Broker-dealers
who acquire shares as principal may thereafter resell such shares from time to
time in transactions, which may involve block transactions and sales to and
through other broker-dealers, including transactions of the nature described
above, in the over-the-counter market or otherwise at prices and on terms then
prevailing at the time of sale, at prices then related to the then-current
market price or in negotiated transactions. In connection with such resales,
broker-dealers may pay to or receive from the purchasers of such shares
commissions as described above.
14
The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in sales of the shares may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933 in
connection with such sales. In such event, any commissions received by such
broker-dealers or agents and any profit on the resale of the shares purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act of 1933.
From time to time the selling stockholders may be engaged in short
sales, short sales against the box, puts and calls and other hedging
transactions in our securities, to the extent permitted by applicable law and
exchange regulations, and may sell and deliver the shares in connection with
such transactions or in settlement of securities loans. These transactions may
be entered into with broker-dealers or other financial institutions. In
addition, from time to time, a selling stockholder may pledge its shares
pursuant to the margin provisions of its customer agreements with its
broker-dealer. Upon delivery of the shares or a default by a selling
stockholder, the broker-dealer or financial institution may offer and sell the
pledged shares from time to time.
EXPERTS
The consolidated financial statements of Telkonet incorporated in this
prospectus by reference to our Form 10-KSB for the years ended December 31, 2003
and 2002 have been audited by Russell Bedford Stefanou Mirchandani LLP,
independent certified public accountants, and have been so incorporated 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 Securities and Exchange Commission allows us to incorporate by
reference the information we file with the Securities and Exchange Commission,
which means that we can disclose important information to you by referring to
another document filed separately with the Securities and Exchange Commission.
The information that we file with the Securities and Exchange Commission 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 filings we make with the Securities and Exchange Commission
under sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, after the date of this prospectus and until all of the shares of our
common stock offered by this prospectus are sold.
o Annual Report on Form 10-KSB for the year ended December 31,
2003, filed on March 30, 2004;
o Current Report on Form 8-K, filed on January 23, 2004;
15
o Current Report on Form 8-K, filed on January 28, 2004;
o Current Report on Form 8-K, filed on February 26, 2004;
o Current Report on Form 8-K, filed on March 19, 2004;
o The description of our common stock contained in our
registration statement on Form 8-A, filed on January 28, 2004.
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
(410) 897-5900
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 Securities and Exchange Commission. These reports and other information
may be inspected and copied at public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. Information on the operation of the
Securities and Exchange Commission's public reference facilities can be obtained
by calling the Securities and Exchange Commission at 1-800-SEC-0330. Copies may
be obtained at prescribed rates from the Public Reference Section of the
Securities and Exchange Commission at its principal office in Washington, D.C.
The Securities and Exchange Commission 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 Securities and Exchange Commission. The address of the Securities and
Exchange Commission's web site is http://www.sec.gov. We also maintain an
internet website that contains all of our periodic and other reports, proxy and
information statements and other information. The address of our website is
http://www.telkonet.com.
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.
16
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. You should not assume that the information contained
in this document is accurate after the date of this prospectus unless the
information specifically indicates that another date applies.
17
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the 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........ $ 10,075
Accounting Fees and Expenses............................... $ 10,000
Legal Fees and Expenses.................................... $ 10,000
Printing Fees and Expenses................................. $ 5,000
Miscellaneous.............................................. $ 2,000
-----------------
TOTAL...................................................... $ 37,075
=================
Each amount set forth above, except the Securities and Exchange Commission
registration fee, is estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 16-10a-902 of the Utah Business
Corporation Act, which enables Telkonet 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, Telkonet'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, Telkonet may not indemnify a director (i) in
connection with a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation, or (ii) 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
18
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
1 Placement Agency Agreement, dated February 16, 2004, by and
between Telkonet, Inc. and CDC Securities (incorporated by
reference to our Registration Statement on Form S-3 (No.
333-114425), filed on April 13, 2004)
4.1 Form of Series A Convertible Debenture (incorporated by
reference to our Form 10-KSB (No. 000-27305), filed on March
31, 2003)
4.2 Form of Series A Non-Detachable Warrant (incorporated by
reference to our Form 10- KSB (No. 000-27305), filed on March
31, 2003)
4.3 Form of Series B Convertible Debenture (incorporated by
reference to our Form 10-KSB (No. 000-27305), filed on March
31, 2003)
4.4 Form of Series B Non-Detachable Warrant (incorporated by
reference to our Form 10- KSB (No. 000-27305), filed on March
31, 2003)
4.5 Form of Senior Note (incorporated by reference to our
Registration Statement on Form S-1 (No. 333-108307), filed on
August 28, 2003)
4.6 Form of Non-Detachable Senior Note Warrant (incorporated by
reference to our Registration Statement on Form S-1 (No.
333-108307), filed on August 28, 2003)
5 Opinion of Baker & Hostetler LLP as to the validity of the
issuance of the common stock of Telkonet, Inc. being
registered
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.
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:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(b) 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
19
(c) 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 (1)(a) and (1)(b) 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.
(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.
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.
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.
20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and 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 19th day
of April, 2004.
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 Ronald W. Pickett, E. Barry Smith and
Robert P. Crabb, or any 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 April 19, 2004 by the following
persons in the capacities indicated below.
SIGNATURE TITLE
--------- -----
/S/ RONALD W. PICKETT Chief Executive Officer and
--------------------- Director (Principal Executive Officer)
Ronald W. Pickett
/S/ E. BARRY SMITH Chief Financial Officer (Principal
------------------ Financial and Accounting Officer)
E. Barry Smith
/S/ DAVID POWELL Chief Operating Officer
----------------
David Powell
/S/ STEPHEN L. SADLE Senior Vice President and Director
--------------------
Stephen L. Sadle
/S/ WARREN V. MUSSER Chairman of the Board of Directors
--------------------
Warren V. Musser
/S/ A. HUGO DECESARIS Director
---------------------
A. Hugo DeCesaris
/S/ DAVID W. GRIMES Director
-------------------
David W. Grimes
/S/ THOMAS C. LYNCH Director
-------------------
Thomas C. Lynch
21
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
1 Placement Agency Agreement, dated February 16, 2004, by and
between Telkonet, Inc. and CDC Securities (incorporated by
reference to our Registration Statement on Form S-3 (No.
333-114425), filed on April 13, 2004)
4.1 Form of Series A Convertible Debenture (incorporated by
reference to our Form 10-KSB (No. 000-27305), filed on March
31, 2003)
4.2 Form of Series A Non-Detachable Warrant (incorporated by
reference to our Form 10- KSB (No. 000-27305), filed on March
31, 2003)
4.3 Form of Series B Convertible Debenture (incorporated by
reference to our Form 10-KSB (No. 000-27305), filed on March
31, 2003)
4.4 Form of Series B Non-Detachable Warrant (incorporated by
reference to our Form 10- KSB (No. 000-27305), filed on March
31, 2003)
4.5 Form of Senior Note (incorporated by reference to our
Registration Statement on Form S-1 (No. 333-108307), filed on
August 28, 2003)
4.6 Form of Non-Detachable Senior Note Warrant (incorporated by
reference to our Registration Statement on Form S-1 (No.
333-108307), filed on August 28, 2003)
5 Opinion of Baker & Hostetler LLP as to the validity of the
issuance of the common stock of Telkonet, Inc. being
registered
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)
22