SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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(Name of Registrant as Specified In Its Charter)
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Common Stock
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1) Title of each class of securities to which transaction applies:
21,815,371
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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5) Total fee paid:
[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act
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was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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TELKONET, INC.
902-A COMMERCE ROAD
ANNAPOLIS, MARYLAND 21401
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY JUNE 8, 2001
To the Stockholders:
The 2001 Annual Meeting of Stockholders of Telkonet, Inc. will be held at
the Hampton Inn & Suites, 124 Womack Drive, Annapolis, Maryland 21401 on Friday,
June 8, 2001 at 2:00 P.M. local time for the following purposes:
1. To elect four directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified;
2. To ratify the appointment of independent accountants for 2001; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on April 20, 2001 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, stockholders are urged to
complete, sign, date and return the enclosed proxy card in the enclosed envelope
as promptly as possible.
By order of the Board of Directors,
/s/ Robert P. Crabb
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Robert P. Crabb
Secretary
Dated: April 20th, 2001
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
IMMEDIATELY, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
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TELKONET, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Telkonet, Inc. for use at
the Company's 2001 Annual Meeting of Stockholders, to be held at the Hampton Inn
& Suites, 124 Womack Drive, Annapolis, Maryland 21401 on Friday, June 8, 2001 at
2:00 P.M. local time, and at any adjournment of the Annual Meeting. This Proxy
Statement, the accompanying proxy card and the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 2000 are first being sent to
stockholders on or about May 9, 2001.
The solicitation of proxies is made by and on behalf of the Company's Board
of Directors. The cost of the solicitation of proxies will be borne by the
Company. In addition to solicitation of proxies by mail, employees of the
Company or its affiliates may solicit proxies by telephone or facsimile.
At the close of business on April 20, 2001, the Company had outstanding
21,815,371 shares of common stock, par value $0.001 per share. Each stockholder
is entitled to one vote per share of the Company's common stock registered in
such stockholder's name on the books of the Company as of the close of business
on April 20, 2001.
Any duly executed proxy received prior to the closing of the polls during
the Annual Meeting will be voted in the manner specified on the proxy. If no
direction is indicated on a proxy, it will be voted to elect as directors the
nominees listed in this Proxy Statement. A proxy given pursuant to this
solicitation may be revoked by a stockholder of record at any time before it is
voted either by delivering a written notice of revocation bearing a date later
than the proxy or a subsequent, duly-executed proxy relating to the same shares
to the Secretary of the Company or by voting in person at the Annual Meeting.
Materials intended for the Secretary of the Company should be mailed to the
Company at 902A Commerce Road, Annapolis, Maryland 21401. The Company's
telephone number is (410) 897-5900.
ITEM 1. ELECTION OF DIRECTORS
The Company's bylaws establish the number of directors at not less than
three members. Pursuant to the bylaws, the Board of Directors may increase the
number of directors to as many as nine or decrease the number of members of the
Board of Directors. The Board of Directors has established the number of
directors at four. At the Annual Meeting, the shares represented by properly
executed proxies, unless otherwise specified, will be voted for the election of
the four nominees named herein, each to serve until the next annual meeting and
until his successor is duly elected and qualified.
If for any reason any of the nominees is not a candidate when the election
occurs (which is not expected), the Board of Directors expects that proxies will
be voted for the election of a substitute nominee designated by the Board of
Directors. The following information is furnished concerning each nominee for
election as a director.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE ELECTION OF EACH NOMINEE.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
DIRECTOR NAME AGE POSITION WITH THE COMPANY SINCE
------------- --- ------------------------- -----
L. Peter Larson 51 President and CEO, Director 2000
David Grimes 63 Chairman of the Board and 2000
Stephen Sadle 55 Chief Technical Officer
Exec.Vice President & COO
Director 2000
A. Hugo DeCesaris 42 Director 2001
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L. PETER LARSON, PRESIDENT & Chief Executive Officer has an extensive background
in engineering and finance. After completing his BSEE and MS in Operations
Research at Rensselaer Polytechnic, he began his career with General Dynamics
Corporation. During his 20+-year career at GD, Larson served in various
executive positions including Vice President and Controller of their
international Services Company and Senior Vice President for Finance and CFO for
the Cessna Aircraft Company. While at Cessna he developed their European and
South American financing programs. Larson served as COO of Integrated
Communications System Networks, Inc. from 1995 to 1997, and was most recently a
consultant in several start-up and turn-around assignments for clients in
electronics manufacturing, software, Internet application development and
telecommunications, including CFO of Telepad Corporation and Financial advisor
to The Windermere Group.
DAVID W. GRIMES, CHAIRMAN, is a co-founder of the company. From 1963-1982 Grimes
was the Senior Executive with NASA for the Delta Program, heading the $200
Million per annum program. From 1982-1989 he was Founder and CEO of Transpace
Carriers Inc., a venture to commercialize the delta launch vehicle. From
1989-1992 he was the Engineering Division Director at EER Inc., of Seabrook
Maryland with responsibility for over 100 engineers and technicians on
electrical mechanical and thermal tasks for Goddard Space Flight Center. From
1992-1999, Chief Engineer for Final Analysis, Inc. and led the design and
development of the Low Earth Orbit constellation of 38 satellites for use in
global store and forward communications. Grimes is a recognized expert in space
and ground communications systems and brings this expertise to bear on the
implementation of the hybrid telephony and high speed Internet technology.
STEPHEN L. SADLE, CHIEF OPERATING OFFICER, is a co-founder of the company. From
1970-1986 Sadle was president of a successful infrastructure construction and
development company in the Washington D.C. metro area and was awarded Small
Businessman of the Year in 1980.1986-1999 He was Vice President of Business
Development and Sales for The Driggs Corporation, a major heavy and
infrastructure firm interfacing with both government and the private
sectors.1999-2000 Sadle was Vice President and General Sales Manager of
Internos, a provider of web based vertical intranet applications and developed
operating extranets in the transportation and construction industries. He brings
significant management, contracting and entrepreneurial skills to the company.
ROBERT P. CRABB, CORPORATE SECRETARY, is the President and Managing Director of
Susquehanna Development L.L.C. a marketing consulting firm. Mr. Crabb's services
to the Company as a consultant include marketing and public company
administration. He has over 30 years of sales, marketing and public and private
corporate management experience including a career of sales management with
MetLife. He is also the Corporate Secretary of Medical Advisory Systems, Inc.
A. HUGO DECESARIS, DIRECTOR, HAS over 24 years experience in the homebuilding
industry with Washington Homes, Inc. where he served as Vice President and a
member of the Board of Directors. In January of 2001, Washington Homes, Inc.
became a wholly owned subsidiary of K. Hovnanian Enterprises, Inc. and is now
one of the top ten homebuilders in the nation. Mr. DeCesaris is currently the
Regional Vice President for the Maryland Division of Washington Homes, Inc.,
President and Owner of Southern Maryland's largest Marina in California,
Maryland and is a member of the Board of directors of MNCBIA Volume Builders
Council.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended December 31, 2000, the Board of Directors held
(4) four regular meetings, which all directors attended.
DIRECTORS' COMPENSATION
The Company reimburses non-management directors for costs and expenses in
connection with their attendance and participation at Board of Directors
meetings and for other travel expenses incurred on the Company's behalf. The
Company compensates each non-management Director $250.00 for each meeting of the
Board of Directors.
EXECUTIVE OFFICERS
L. Peter Larson, President and Chief Executive Officer
Stephen Sadle, Executive Vice President and Chief Operating Officer
Robert P. Crabb, Corporate Secretary
David Grimes, Chief Technical Officer
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ITEM 2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Stefanou & Company as the Company's
independent public accountants for 2001. Although ratification by stockholders
is not required, the Board of Directors requests that stockholders ratify this
appointment. If ratification is not obtained, the Board will reconsider this
appointment. The Company has been advised that representatives of Stefanou &
Company will be present at the Annual Meeting. They will be afforded the
opportunity to make a statement, should they desire to do so, and respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE FOR THIS PROPOSAL.
OTHER MATTERS
The Board of Directors is not aware of any other matter that may be
presented for action at the Annual Meeting. If any other matter comes before the
Annual Meeting, the persons named in the enclosed proxy will vote the proxy with
respect thereto in accordance with their best judgment, pursuant to the
discretionary authority granted by the proxy.
VOTE REQUIRED
The Company's bylaws provide that the holders of a majority of the
outstanding shares of the Company, present in person or by proxy, will
constitute a quorum, and that the affirmative vote of a majority of the shares
represented at the Annual Meeting and constituting a quorum is required for
approval of any proposal brought before the Annual Meeting, unless a greater
proportion or number of votes is required by law or by the Company's certificate
of incorporation or bylaws. The election of directors will require the
affirmative vote of a majority of the shares present at the Annual Meeting and
constituting a quorum. For purposes of determining whether the proposal has
received a majority vote, abstentions will be included in the vote total and
will have the same effect as a negative vote. In instances where brokers are
prohibited from exercising discretionary authority for beneficial owners of the
Company's common stock who have not returned a proxy, those shares will not be
included in the vote totals and will have no effect on the outcome of the vote.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
a) Beneficial owners of five percent (5%) or greater, of the Company's common
stock: No preferred stock is outstanding at the date of this offering. The
following sets forth information with respect to ownership by holders of more
than five percent (5%) of the Registrant's common stock known by the Registrant
based upon 21,815,371 shares outstanding at December 31, 2000.
AMOUNT OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL INTEREST PERCENT OF CLASS
- -------------- ------------------------------------ ------------------- ----------------
Common David Grimes, 1621 John Ross Lane, 5,131,917 21.3%
Crownsville MD
Stephen Sadle, 1200 John Ross Court, 5,922,694 24.6%
Crownsville, MD
Donald Erat, 13700 Canal Vista Court, 2,861,347 11.9%
Potomac, MD
L. Peter Larson, 125 SpaView Ave, Annapolis, 1,705,285 7.1%
MD
Ron Pickett, 2321 Ocean Point Drive, 2,658,964 11.0%
Wilmington, NC
FERST for St. Mary's Inc. 1,958,549 8.1%
P.O. Box 167 Mechanicsville, MD
b) The following sets forth information with respect to the Company's common
stock beneficially owned by each Executive Officer and Director and by all
Directors and Executive Officers as a group, at December 31, 2000.
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AMOUNT BENEFICIAL
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER INTEREST OF CLASS PERCENT
- -------------- ------------------------------------ ----------------- -------
Common David Grimes, 1621 John Ross Lane, Crownsville MD 5,131,917 (1) 21.3%
Stephen Sadle, 1200 John Ross Court, Crownsville, MD 5,922,694 (2) 24.6%
Robert P Crabb, 583 Lombard Rd. Rising Sun, MD 379,793 (3) 1.6%
L. Peter Larson, 125 SpaView Ave, Annapolis, MD 1,705,285 (4) 7.1%
A. Hugo DeCesaris 1802 Bright Seat Road
Landover, Maryland 20785 1,000,000 (5) 4.5%
All Directors and Executive Officers 14,139,689 59.1%
(1) Includes 160,000 options to purchase common stock at $1.00 per share that
vest ratably over four years beginning October 16, 2000.
(2) Includes 200,000 options to purchase common stock at $1.00 per share that
vest ratably over four years beginning October 16, 2000.
(3) Includes 100,000 options to purchase common stock at $1.00 per share that
vest ratably over four years beginning October 16, 2000. Security interest
is held by Susquehanna Development, L.L.C. the marketing consulting company
in which Mr. Crabb is the President and Managing Director.
(4) Includes 200,000 options to purchase common stock at $1.00 per share that
vest ratably over four years beginning October 16, 2000.
(5) On March 9, 2001 Telkonet entered into an Option Agreement with Mr.
DeCesaris whereby Mr. DeCesaris provided his personal financial guarantee
for a Telkonet business loan from First Mariner Bank in the form of a
$250,000 letter of credit. Mr. DeCesaris' Option Agreement provides for the
exercise of 4 warrants for each $1.00 of the Letter of Credit at the
exercise price of $.50 per share over a period of seven years from the date
of the Agreement.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal year ended December 31, 2000 for each of the three highest paid persons
who are officers or directors of the Company.
(a) Cash Compensation.
Compensation paid by the Company for all services provided up to December 31,
2000 to each of its executive officers.
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Annual Compensation Long Term Compensation
------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h)
Name and Principal Position Year Salary Bonus Annual Other Awards Restricted Underlying/Options LTIP or
($) Compensation ($) Stock Securities other
L. Peter Larson, C.E.O. 2000 $76,747 200,000
David Grimes, C.T.O. 2000 $60,918 160,000
Stephen Sadle, C.O.O. 2000 $76,747 200,000
Robert P Crabb, Secy. 2000 $ 0 100,000
- -----------------------
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STOCK OPTION EXERCISES
The following table summarizes information relating to stock option
exercises during 2000 and the number and value of unexercised stock options.
AGGREGATE OPTION EXERCISES IN 2000 AND
OPTION VALUES AS OF DECEMBER 31, 2000
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 2000 DECEMBER 31, 2000 (1)
------------------------------------------ --------------------------------
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- -------------- ------------- ------------------- --------------------- ---------------- ---------------
L. Peter Larson 0 0 0 200,000 $ 0 $100,000
David Grimes 0 0 0 160,000 $ 0 $ 80,000
Stephen Sadle 0 0 0 200,000 $ 0 $100,000
Robert P. Crabb 0 0 0 100,000 $ 0 $ 50,000
(1) On December 31, 2000 there was no active market for the stock. Based on the
trading history of the stock, management estimates the fair market value of the
stock as of the date of the proxy statement to be $1.50 per share.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has employment agreements with L. Peter Larson and Stephen
Sadle. Under the stock option plans established by the Company, stock options
are periodically granted to employees at the discretion of the Board of
Directors. Executives of the Company are eligible to receive stock option
grants, based upon individual performance and the performance of the Company as
a whole.
Mr. Larson is employed pursuant to an employment agreement for a 3-year
term that commenced June 19, 2000 and provides for an annual salary of $ 130,000
and bonuses and benefits based upon the Company's internal policies.
Mr. Sadle is employed pursuant to an employment agreement for a 3-year term
that commenced June 19,2000 and provides for an annual salary of $ 130,000 and
bonuses and benefits based upon the Company's internal policies.
AUDIT FEES
The aggregate fees billed to the Company by its accountants for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended December 31, 2000 and the reviews of the
financial statements included in the Company's Forms 10-QSB for the periods
ending March 31, 2000, June 30, 2000 and September 31, 2000, respectively, were
$ 22,800.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During the fiscal year ended December 31, 2000, the Company's accountants
did not engage in the direct or indirect operation or supervision of the
Company's information system or manage the Company's local area network, the
design or implementation of a hardware or software system that aggregates source
data underlying the financial statements or generates information that is
significant to the Company's financial statements.
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ALL OTHER FEES
The Company's accountant did not render any services other than the audit
of the Company's financial statements and review of the financial statements
contained in the Company's Forms 10-QSB for the fiscal year ended December 31,
2000.
COMPLIANCE WITH REPORTING REQUIREMENTS OF SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Exchange Act, the Company's directors,
executive officers and any person holding 10.0% or more of its common stock are
required to report their beneficial ownership and any changes therein to the
United States Securities and Exchange Commission. Specific due dates for these
reports have been established and the Company is required to report herein any
failure to file such reports by those due dates. Based solely on review of the
copies of such reports furnished to the Company or written representations that
no other reports were required, the Company believes that, during 2000, its
executive officers, directors and greater than 10.0% beneficial owners complied
with all applicable Section 16(a) reporting requirements.
OTHER INFORMATION
Brokers and other persons holding the Company's common stock in their
names, or in the names of a nominee, will be requested to forward this Proxy
Statement and the accompanying materials to the beneficial owners of the common
stock and to obtain proxies, and the Company will defray reasonable expenses
incurred in forwarding such material.
The Company's Annual Report to Stockholders, including audited financial
statements and schedules, accompanies this Proxy Statement.
STOCKHOLDER PROPOSALS
Stockholders may submit written proposals to be considered for stockholder
action at the Company's 2002 Annual Meeting of Stockholders. To be eligible for
inclusion in the Company's Proxy Statement for the 2002 Annual Meeting,
stockholder proposals must be received by the Company by December 7, 2001 and
must otherwise comply with applicable Securities and Exchange Commission
regulations. Stockholder proposals should be addressed to the Company at its
principal place of business, attention: Secretary.
By order of the Board of Directors,
/s/ Robert P. Crabb
-------------------
Robert P. Crabb
Secretary
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TELKONET, INC.
PROXY 902A Commerce Road
Annapolis, Maryland 21401
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TELKONET, INC.
FOR USE ONLY AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 8TH, 2001
AND ANY ADJOURNMENT OT POSTPONEMENT THEREOF.
The undersigned, being a stockholder of TELKONET, INC., hereby authorizes Robert
P. Crabb and Stephen Sadle, and each of them, with the full power of
substitution, to represent the undersigned at the Annual Meeting of Stockholders
of TELKONET, INC. to be held at the Hampton Inn & Suites, 124 Womack Drive,
Annapolis, Maryland 21401 on June 8th, 2001 at 2:00 P.M., local time, and at any
adjournment or postponement thereof, with respect to all votes that the
undersigned would be entitled to cast, if then personally present, as appears on
the reverse side of this proxy.
In their discretion, the proxies are authorized to vote with respect to matters
incident to the conduct of the meeting and upon such other matters as may
properly come before the meeting. This proxy may be revoked at any time before
it is exercised.
Shares of the Common Stock of TELKONET, INC. will be voted as specified. If no
specification is made, shares will be voted FOR the nominees for director, FOR
ratification of the appointment of the independent accountants and IN ACCORDANCE
WITH THE DISCRETION OF THE PROXIES as to any other matter, which may properly
come before the Meeting.
1. ELECTION OF DIRECTORS
Nominees: L. Peter Larson David Grimes Stephen Sadle Hugo DeCesaris
[ ] FOR all nominees [ ] WITHHELD as to all nominees
[ ] FOR, except vote withheld from the following nominee(s): _________________
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of a Notice of Annual Meeting of
Stockholders of Telkonet, Inc. called for June 8, 2001, and a Proxy Statement
for the Meeting prior the signing of this proxy.
DATED: ____________, 2001 ______________________________________________
PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEARS(S)
ON THIS PROXY. WHEN SIGNING IN A REPRESENTATIVE
CAPACITY, PLEASE GIVE TITLE.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.