Registration Statement
As
filed
with the Securities and Exchange Commission on October 13, 2006
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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Amount
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Proposed
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Proposed
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To
Be
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Maximum
Offering
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Maximum
Aggregate
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Registration
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Title
of each Class of Securities To Be Registered
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Registered
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Price
Per Share
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Offering
Price
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Fee
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Common
Stock, $0.001 par value
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1,739,683
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$
2.70 (1)
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$4,697,145
(1)
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$503.00
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(1) 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. We 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 state
where the offer or sale is not permitted.
Subject
to completion, dated October 13, 2006
PROSPECTUS
TELKONET,
INC.
1,739,683
Shares
Common
Stock
This
prospectus covers 1,739,683 shares of our common stock that may be offered
and
sold from time to time by the selling stockholder. 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 $23,503.
These
selling stockholder 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 stockholder 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 October 10, 2006, the last reported sale price of our common stock was
$2.70.
Investing
in shares of our common stock involves risks. See “RISK FACTORS” beginning on
page 4 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.
We 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 October __, 2006.
TABLE
OF CONTENTS
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THE
COMPANY
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1
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RISK
FACTORS
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4
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FORWARD-LOOKING
STATEMENTS
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7
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USE
OF PROCEEDS
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7
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SELLING
STOCKHOLDERS
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8
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PLAN
OF DISTRIBUTION
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9
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EXPERTS
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11
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LEGAL
MATTERS
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11
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INFORMATION
INCORPORATED BY REFERENCE
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11
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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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12
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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
The
Company was formed in 1999 to develop products for use in the powerline
communications (PLC) industry. PLC products use existing electrical wiring
in
commercial and residential buildings to carry high speed data communications
signals, including the Internet. Since its formation, the Company has focused
on
development and marketing of its PLC technology. Following the acquisition
of Microwave Satellite Technologies (MST) in January 2006, the Company began
offering complete sales, installation and service of VSAT and business
television networks, and became a full-service national Internet Service
Provider (ISP). The acquisition of the MST business enabled the Company to
begin
offering a complete "triple-play" solution to subscribers of HDTV, VoIP
telephony and NuVision Broadband Internet access, in commercial multi-dwelling
units and hotels.
Our
powerline communications technology, the “Telkonet iWire SystemTM”
product
suite (formerly referred to as the PlugPlus™ product suite), consists of four
primary components, the Gateway, the eXtender, the Coupler and the iBridge.
The
Gateway, the hub of the Telkonet iWire SystemTM,
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. The eXtenderTM
is used
to extend the reach of the Gateway in larger buildings or campus environments.
The
Telkonet iWire SystemTM
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 Telkonet iWire SystemTM
product
suite is installed by connecting an incoming broadband signal (DSL, TL,
satellite or cable modem) into the Gateway and connecting the Gateway to the
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 iBridgeTM
can
communicate with one another and can share a single broadband resource via
the
Gateway.
We
are a
member of the HomePlug™ 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.
We
are a
Utah corporation and our principal executive offices are located at 20374 Seneca
Meadows Parkway, Germantown, Maryland 20876.
Business
History
In
January 2002, we announced that we had shifted our management emphasis from
research and development to product sales and marketing in order to move our
initial proprietary products into the commercial market. In January 2002, the
Board of Directors, Founders and executive management of the Company also
reassessed the Company’s capital structure. In order to attract additional
management and marketing expertise, and to raise the necessary capital for
manufacturing, sales, and marketing, the Board of Directors approved a plan
authorizing the repurchase of certain shares of, and options to purchase,
Telkonet common stock held by each of David Grimes, L. Peter Larson and Stephen
Sadle who, at the time of the stock repurchase, each owned in excess of five
percent of the issued and outstanding capital stock and were directors and
executive officers of Telkonet. The net effect of the recapitalization was
to
reduce the number of shares of issued and outstanding common stock from
approximately 22,100,000 shares to 13,900,000 shares.
In
May
2002, we concluded an offering of Series A convertible debentures pursuant
to
which we raised approximately $1.7 million dollars for working capital purposes.
In the fourth quarter of 2002, we announced the successful installation of
our
Telkonet iWire SystemTM
product
suite at a historic inn in Augusta, Georgia and installation of a product field
trial in Wilmington, North Carolina.
In
the
first quarter of 2003, we concluded an offering of Series B convertible
debentures pursuant to which we raised approximately $2.5 million dollars for
working capital purposes. We also executed a strategic alliance agreement with
Choice Hotels International (NYSE: CHH), one of the largest hotel franchise
companies in the world, pursuant to which we agreed to become a Choice
Hotels-endorsed vendor.
In
the
second quarter of 2003, we concluded an offering of Senior Notes pursuant to
which we raised approximately $5,000,000, exclusive of placement costs and
fees.
The proceeds of the Senior Note offering were designated for working capital
purposes.
In
January 2004, the Board of Directors determined to permit the Senior
Noteholders, for a limited period of time, to convert their Senior Notes into
the Company's common stock at a conversion price of $2.10 per share. In
connection with this transaction, Senior Noteholders converted Senior Notes
having an aggregate principal value of $2,539,000. As of June 30, 2006, the
Senior Notes have been paid in full.
In
February 2004, we completed a private offering of our common stock resulting
in
net proceeds of $12.8 million. We sold 6,387,600 shares of our common stock
in
the private offering. The proceeds of the private placement were designated
for
working capital purposes.
In
October 2005, we announced that we completed a convertible senior debt
financing of $20 million. The proceeds of this financing were reserved for
general working capital needs. The convertible senior notes were purchased
by two institutional investors in the face amount of $10 million
each. The
Company had the right at any time to pre-pay the convertible senior notes in
cash or, subject to satisfaction of certain conditions, common stock. If the
Company elected to use common stock to pre-pay the convertible senior notes,
the
price of the common stock was set at the lower of $5 or 92.5% of the average
recent market price. In the event of a discretionary prepayment of the
convertible senior notes by the Company, the Company was obligated to issue
additional warrants to the noteholders covering 65% of the amount pre-paid
at a
strike price of $5 per share. The Company made three discretionary prepayments
on the convertible senior notes prior to their repayment (which is described
in
greater detail below). As a result of these accelerated payments, Telkonet
issued warrants to purchase 540,910 shares of common stock to each of the
noteholders. The common stock underlying a portion of these repayment warrants
are being registered in the registration statement of which this prospectus
forms a part. In connection with the convertible senior
note financing, the Company agreed to certain financial covenants in the
Note evidencing such indebtedness which required the Company to achieve minimum
revenue of $2 million for each fiscal quarter during the term of the Note.
The
Company failed to meet this financial covenant for the period ended June 30,
2006 and, therefore, was required to pay the noteholders an aggregate
accelerated principal payment of $1,000,000 on or before September 1, 2006.
Although the Company believes that the failure to meet this covenant did not
constitute an event of default under the Senior Convertible Note, one of the
noteholders informed the Company that it believed an event of default had
occurred. As a result of this dispute, on August 14, 2006, the Company
executed separate settlement agreements with each Convertible Senior Noteholder.
Pursuant to the settlement agreements the Company paid to the lenders
$9,910,392, in the aggregate, plus accrued but unpaid interest and certain
premiums specified in the Notes in full satisfaction of the amounts then
outstanding under the Notes. In exchange for these payments, which were
comprised of cash, common stock and warrants to purchase common stock, each
noteholder agreed to waive the Company's failure to satisfy the minimum revenue
test for the Fiscal Quarter ended June 30, 2006 and any Event of Default that
would arise under the Note solely as a result of the failure to satisfy the
minimum revenue test for such fiscal quarter. As of September 15, 2006 the
Convertible Senior Notes have been paid in full.
In
January 2006, the Company acquired, for $9 million, a 90% interest in Microwave
Satellite Technologies (MST), a communications technology company that offers
complete sales, installation, and service of Very Small Aperture Terminal
(VSAT) and business television networks, and is a full-service national
Internet Service Provider (ISP). Following this acquisition the Company
began providing a “triple-play” solution to HDTV, VoIP telephony and
Internet subscribers. The $9 million purchase price is payable $1.8 million
in
cash and 1.6 million unregistered shares of the Company’s common stock. With
respect to the cash portion of the purchase price, $900,000 was paid at the
closing and the remaining $900,000 is payable in January 2007. With
respect to the stock portion of the purchase price, 600,000 shares of Telkonet
common stock were paid at the closing and in the second quarter 2006 and the
remaining 1,000,000 shares are currently held in escrow and shall be released
upon the achievement of 3,300 “triple play” subscribers over a three year
period. The Company plans to expand MST's existing operations,
which currently are concentrated in Manhattan, throughout New York
and increase its presence in other major metropolitan cities using the New
York system as a template.
On
August
31, 2006, we completed a private placement of 2.4 million shares of our common
stock to Enable Capital Management for gross proceeds of $6.0 million. No
underwriting commissions were paid in connection with this transaction. The
proceeds of this offering will be used for general working capital needs. As
part of this offering we also issued to this investor warrants to purchase
1.56
million shares of our common stock at an exercise price of $4.17 per share.
These warrants expire five years from the date of issuance.
Technology
We
have
applied for patents that cover the unique technology integrated into the
Telkonet iWire SystemTM
product
suite. We also continue to identify, design and develop enhancements to our
core
technologies that will provide additional functionality, diversification of
application and desirability for current and future users of the Telkonet iWire
SystemTM
product
suite.
In
January 2003, we received Federal Communications Commission
(FCC) approval to market the Telkonet iWire SystemTM
product
suite. 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. An independent, FCC-certified testing lab has
verified that our Gateway complies with the FCC technical requirements for
Class A digital devices. No further testing of this device is required and
the device may be manufactured and marketed for commercial use.
In
March 2005, we received final certification of our Telkonet iWire
SystemTM
product
suite from European Union (EU) authorities, which certification was
required before we could sell and permanently install our products in EU
countries. As a result of the certification, Telkonet products that will be
sold
and installed in EU countries will bear the Conformite Europeene (CE) mark,
a
symbol that demonstrates that the product has met the EU’s regulatory standards
and is approved for sale within the EU. We now have satisfied the governmental
requirements for product safety and certification in the EU and are free to
sell
and install the Telkonet iWire SystemTM
product
suite in the EU.
In
June 2005, we received the National Institute of Standards and Technology
(NIST) Federal Information Processing Standard (FIPS) 140-2 validation
for the Gateway. In July 2005, we received FIPS 140-2 validation for the
eXtender and iBridge. The U.S. federal government requires, as a condition
to
purchasing certain information processing applications, that such applications
receive FIPS 140-2 validation. U.S. federal agencies use FIPS 140-2 compliant
products for the protection of sensitive information. As a result of the
foregoing validations, as of July 2005, all of Telkonet’s powerline carrier
products have satisfied all governmental requirements for security certification
and are eligible for purchase by the U.S. federal government. In addition to
the
foregoing, Canadian provincial authorities use FIPS 140-2 compliant products
for
the protection of sensitive designate information. The
Communications-Electronics Security Group (CESG) also has stated that FIPS
140-2 compliant products meet its security criteria for use in data traffic
categorized as “Private.” CESG is part of the United Kingdom’s National
Technical Authority for Information Assurance, which is a government agency
responsible for validating the security of information processing applications
for the government of the United Kingdom, financial institutions, healthcare
organizations, and international governments, among others.
In
December 2005, the United States Patent and Trademark Office issued patent
number 6,975,212 titled “Method and Apparatus for Attaching Power Line
Communications to Customer Premises” (U.S. Pat. App. No. 10/219, 811). The
patent application covers our proprietary Coupler technology, which enables
the
conversion of electrical outlets into high-speed data ports without costly
installation, additional wiring, or significant disruption of business activity.
The Coupler is an integral component of the Telkonet iWire SystemTM
product
suite.
In
November 2005, we received the Norma Official Mexicana
(NOM) certification, enabling our Telkonet iWire SystemTM
product
suite to be sold in Mexico. NOM certification is required for our products
to be
sold in Mexico, and no further certifications are required for us to sell the
Telkonet iWire SystemTM
product
suite in Mexico.
In
September 2006, the United States Patent and Trademark Office issued patent
number 7,091,831, titled "Method and Apparatus for Attaching Power Line
Communications to Customer Premises". The patented technology incorporates
a
safety disconnect circuit breaker into the Telkonet Coupler, creating a single
streamlined unit. In doing so, installation of the Telkonet iWire System(TM)
is
faster, more efficient, and more economical than with separate disconnect
switches, delivering optimal signal quality. The Telkonet Integrated Coupler
Breaker patent covers the unique technique used for interfacing and coupling
its
communication devices onto the three-phase electrical systems that are
predominant in commercial buildings.
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 June 30, 2006, the Company has incurred cumulative losses
of
$54,816,697 and has never generated enough funds through operations to support
its business. The Company expects to continue to incur operating losses through
2006. 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.
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
September 21, 2006, the Company’s officers and directors owned 20.4% 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 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.
Recent
accounting pronouncements may impact our future financial position and results
of operations.
There
have been new accounting pronouncements or regulatory rulings that have an
impact on our future financial position and results of operations. For instance,
on December 16, 2004, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123 (revised 2004), "Share-Based Payment", which is a
revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation".
SFAS 123(R) supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and amends FASB Statement No. 95, "Statement of Cash Flows".
Generally, the approach in SFAS 123(R) is similar to the approach described
in
Statement 123. However, SFAS 123(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in
the
income statement based on their fair values. Pro forma disclosure is no longer
an alternative. We have adopted SFAS 123(R) effective January 1, 2006 under
the
modified-prospective method. The adoption of SFAS 123(R)'s fair value method
has
a significant impact on our result of operations, although it will have no
impact on our overall financial position. Our estimate of stock-based
compensation expense is affected by our stock price, the number of stock-based
awards we may grant in 2006, as well as a number of complex and subjective
valuation assumptions including, but not limited to, the volatility of our
stock
price, interest rates and employee stock option exercise behaviors.
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
June 30, 2006, the Company had outstanding employee options to purchase a total
of 9,108,130 shares of common stock at exercise prices ranging from $1.00 to
$5.29 per share, with a weighted average exercise price of $1.89. As of June
30,
2006, 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
June 30, 2006, the Company had warrants outstanding to purchase a total of
1,594,320 shares of common stock at exercise prices of $5.00 per share. 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
powerline communications industry is intensely competitive and rapidly
evolving.
The
Company operates in a highly competitive, quickly changing environment, and
the
Company’s future success will depend on its ability to develop and introduce new
products and product enhancements that achieve broad market acceptance in
commercial and governmental sectors. The Company will also need to respond
effectively to new product announcements by its 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 the Company’s reputation and brand;
and
|
| |
·
|
decline
in the average selling price of the Company’s
products.
|
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 Company
believes it has the only commercial integrated three phase solution for
“in-building” distribution of broadband utilizing the electrical wiring
infrastructure. Certain HomePlug(TM)
Powerline Alliance members offer similar PLC solutions for the residential
market. Although the HomePlug(TM)
Powerline Alliance members do not presently compete with the Company in the
commercial market, there can be no assurance that the HomePlug(TM)
Powerline Alliance members or any other company 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, may
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.
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 stockholder
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
STOCKHOLDER
The shares of common stock being offered pursuant to this prospectus by
the
selling stockholder include shares of common stock issuable to the selling
stockholder upon exercise of the warrants (i) issued in connection with
the
repayment of the Convertible Senior Note on September 15, 2006, (ii) issued
on
October 27, 2005 in connection with the issuance of the Convertible Senior
Notes
and (iii) issued in January 2006, July 2006 and August 2006 in connection
with
accelerated payments under the Convertible Senior Note. For additional
information regarding the issuance of these warrants to purchase common
stock,
see “Business History” beginning on page 1 of this prospectus. We are
registering the shares of common stock in order to permit the selling
stockholder to offer the shares issued upon exercise of the warrants for
resale
from time to time. Except for the ownership by the selling stockholder
of our
securities, the selling stockholder has not had any material relationship
with
us within the past three years.
The
table
below lists the selling stockholder and other information regarding the
beneficial ownership of the shares of common stock by the selling stockholder.
The second column lists the number of shares of common stock beneficially
owned
by the selling stockholder, based on its ownership of the warrants, as
of
October 13, 2006, assuming exercise of the warrants held by the selling
stockholder on that date, without regard to any limitations on such exercise.
The third column lists the shares of common stock being offered by this
prospectus by the selling stockholder.
In
accordance with the terms of registration rights agreements with the selling
stockholder, this prospectus generally covers the resale of at least 130%
of the
number of shares of common stock issuable upon exercise of the warrants
specified above as of the trading day immediately preceding the date this
registration statement is initially filed with the SEC. Because the exercise
price of the warrants may be adjusted, the number of shares that will actually
be issued may be more or less than the number of shares being offered by
this
prospectus. The fourth column assumes the sale of all of the shares offered
by
the selling stockholder pursuant to this prospectus.
Under
the
terms of the warrants, the selling stockholder may not exercise the warrants
to
the extent such exercise would cause the selling stockholder, together
with its
affiliates, to beneficially own a number of shares of common stock which
would
exceed 4.99% of our then outstanding shares of common stock following such
exercise, excluding for purposes of such determination shares of common
stock
issuable upon exercise of the warrants which have not been exercised. The
number
of shares in the second column does not reflect this limitation. The selling
stockholder may sell all, some or none of its shares in this offering.
See “Plan
of Distribution” beginning on page 9 of this
prospectus.
|
|
|
|
|
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|
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
|
|
Kings
Road Investments, Ltd. (1)
|
|
|
1,472,496
|
|
|
|
1,739,683
|
|
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174,454
|
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(1)
|
|
Kings
Road Investments Ltd. (“Kings Road”) is a wholly-owned subsidiary of
Polygon Global Opportunities Master Fund (“Master Fund”). Polygon
Investment Partners LLP and Polygon Investment Partners LP (the
“Investment Managers”), Polygon Investments Ltd. (the “Manager”), the
Master Fund, Alexander Jackson, Reade Griffith and Paddy Dear share
voting
and dispositive power of the securities held by Kings Road. The Investment
Managers, the Manager, Alexander Jackson, Reade Griffith and Paddy
Dear
disclaim beneficial ownership of the securities held by Kings
Road.
|
PLAN
OF DISTRIBUTION
We
are
registering the shares of common stock issuable upon exercise of the
warrants to permit the resale of these shares of common stock by the holders
of
the warrants from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling stockholder 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 stockholder may sell all or a portion of the shares of common stock
beneficially owned by it 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
stockholder 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 effected in transactions, which may involve crosses or block
transactions,
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•
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|
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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•
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in
the over-the-counter market;
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|
•
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in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
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•
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|
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
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•
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|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
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•
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|
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;
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•
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|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
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•
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an
exchange distribution in accordance with the rules of the applicable
exchange;
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•
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privately
negotiated transactions;
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•
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short
sales;
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•
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|
sales
pursuant to Rule 144;
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•
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|
broker-dealers
may agree with the selling securityholders to sell a specified number
of
such shares at a stipulated price per share;
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•
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a
combination of any such methods of sale; and
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•
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any
other method permitted pursuant to applicable
law.
|
If
the
selling stockholder effects 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 stockholder 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 stockholder 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 stockholder 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 stockholder may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares.
The
selling stockholder may pledge or grant a security interest in some or all
of
the convertible notes or warrants or shares of common stock owned by it and,
if
it defaults in the performance of its 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 stockholder 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.
The
selling stockholder and any broker-dealer 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 stockholder 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 stockholder 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 stockholder 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
stockholder 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
will
pay all expenses of the registration of the shares of common stock pursuant
to
the registration rights agreement, estimated to be $23,503 in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses
of compliance with state securities or “blue sky” laws; provided, however, that
the selling stockholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling stockholder against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling stockholder will be
entitled to contribution. We may be indemnified by the selling stockholder
against civil liabilities, including liabilities under the Securities Act,
that
may arise from any written information furnished to us by the selling
stockholder specifically for use in this prospectus, in accordance with the
related registration rights agreements, or we may be entitled to contribution.
Once
sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of common stock will be freely tradable in the hands of persons
other
than our affiliates.
EXPERTS
The
consolidated financial statements of Telkonet incorporated by reference in
this
prospectus from our Form 10-K for the year ended December 31, 2005 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, 2005, filed on
March 16, 2006 and the amendment thereto filed on March 29,
2006;
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•
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Quarterly
Reports on Form 10-Q for the quarterly period ended March 31, 2006
(filed
on May 10, 2006) and June 30, 2006 (filed on August 9,
2006);
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•
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Current
Reports on Form 8-K filed on January 24, 2006, February 2, 2006,
April 12,
2006, June 6, 2006, August 16, 2006 and September 6,
2006;
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•
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Definitive
Proxy Statement on Schedule 14A, filed on November 7, 2005;
and
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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,
D.C. 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 October __, 2006. 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
|
|
$
|
503
|
|
|
Accounting
Fees and Expenses
|
|
$
|
10,000
|
|
|
Legal
Fees and Expenses
|
|
$
|
10,000
|
|
|
Printing
Fees and Expenses
|
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$
|
2,000
|
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Miscellaneous
|
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$
|
1,000
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Total
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$
|
23,503
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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.
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Exhibit
Number
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Description
of Exhibits
|
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4.1
|
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Form
of Warrant to Purchase Common Stock (incorporated by reference to
our S-3
Registration Statement filed on September 29, 2006)
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5.1
|
|
Opinion
of Baker & Hostetler LLP
as
to the validity of the issuance of the common stock of Telkonet,
Inc.
being registered
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10.1
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Settlement
Agreement, dated August 14, 2006, by and between Telkonet, Inc. and
Kings
Road Investments, Ltd. (incorporated by reference to our Current
Report on
Form 8-K filed on August 16, 2006)
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10.2
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Securities
Purchase Agreement, dated October 26, 2005, by and among Telkonet,
Inc., Kings Road Investments and Portside Growth & Opportunity Fund
(incorporated by reference to our Current Report on Form 8-K filed on
October 31, 2005)
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10.3
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Registration
Rights Agreement, dated October 27, 2005, by and among Telkonet,
Inc., Kings Road Investments and Portside Growth & Opportunity Fund
(incorporated by reference to our Current Report on Form 8-K filed on
October 31, 2005)
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23.1
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Consent
of Russell Bedford Stefanou Mirchandani LLP relating to the financial
statements of Telkonet, Inc.
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23.2
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Consent
of Baker & Hostetler LLP
(included in Exhibit 5.1)
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24
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Power
of Attorney (included on signature
page)
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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:
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(i)
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To
include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
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(ii)
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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
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(iii)
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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;
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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 13th
day of
October, 2006.
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TELKONET,
INC.
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By:
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/s/
Ronald W. Pickett
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Ronald
W. Pickett
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Chief
Executive Officer
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KNOW
ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Stephen L. Sadle 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 October 13, 2006 by the following persons in the capacities
indicated below.
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Signature
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Title
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/s/
Stephen L. Sadle
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Senior
Vice President and Director
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Stephen
L. Sadle
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/s/
Ronald W. Pickett
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President,
Chief Executive Officer and Director
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Ronald
W. Pickett
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/s/
Richard J. Leimbach
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Vice
President Finance
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Richard
J. Leimbach
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/s/
Warren V. Musser
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Chairman
of the Board of Directors
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Warren
V. Musser
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/s/
Thomas M. Hall
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Director
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Thomas
M. Hall
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/s/
Thomas C. Lynch
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Director
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Thomas
C. Lynch
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/s/
James L. Peeler
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Director
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James
L. Peeler
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/s/
Seth Blumenfeld
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Director
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Seth
Blumenfeld
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EXHIBIT
INDEX
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Exhibit
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Number
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Description
of Exhibits
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4.1
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Form
of Warrant to Purchase Common Stock (incorporated by reference to
our
Current Report on Form 8-K filed on September 6,
2006)
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5.1
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Opinion
of Baker & Hostetler LLP
as
to the validity of the issuance of the common stock of Telkonet,
Inc.
being registered
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10.1
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Settlement
Agreement, dated August 14, 2006, by and between Telkonet, Inc. and
Kings
Road Investments, Ltd. (incorporated by reference to our Current
Report on
Form 8-K filed on August 16, 2006)
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10.2
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Securities
Purchase Agreement, dated October 26, 2005, by and among Telkonet,
Inc., Kings Road Investments and Portside Growth & Opportunity Fund
(incorporated by reference to our Current Report on Form 8-K filed on
October 31, 2005)
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10.3
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Registration
Rights Agreement, dated October 27, 2005, by and among Telkonet,
Inc., Kings Road Investments and Portside Growth & Opportunity Fund
(incorporated by reference to our Current Report on Form 8-K filed on
October 31, 2005)
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23.1
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Consent
of Russell Bedford Stefanou Mirchandani LLP relating to the financial
statements of Telkonet, Inc.
|
|
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23.2
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Consent
of Baker & Hostetler LLP
(included in Exhibit 5.1)
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24
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Power
of Attorney (included on signature
page)
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II-5