NOTE P – SUBSEQUENT EVENT

On January 12, 2022, the Company closed on the contribution of $5 million to the Company (the “Financing”) by VDA Group S.p.A., an Italian joint stock company (“VDA”), in exchange for the issuance (the “Issuance”) by the Company to VDA of (i) 162,900,947 shares of common stock of Telkonet, par value $0.001 per share (the “Common Stock”); and (ii) a warrant to purchase 105,380,666 additional shares of Common Stock (the “Warrant”) (the Financing and the Issuance referred to herein collectively as the “Transaction”).

Also in connection with the Transaction, effective upon the closing, the majority of the existing members of Telkonet’s board of directors (the “Board”) resigned and the vacancies resulting from those resignations were filled by individuals designated by VDA and appointed by the remaining Board members, resulting in a change of control of the Board. In addition, effective upon the closing, Jason L. Tienor resigned as Chief Executive Officer of the Company to become its’ Chief Sales & Operation Officer of the Americas and Piercarlo Gramaglia, Chief Executive Officer of VDA, will provide chief executive officer services to the Company pursuant to a consulting agreement between the Company and VDA.

Following the issuance of 162,900,947 shares of Common Stock to VDA upon the closing of the Transaction, VDA owns 53% of the issued and outstanding Common Stock on a fully diluted as exercised/converted basis and could eventually own as much as 65% of the issued and outstanding Common Stock on a fully diluted as exercised/converted basis if it fully exercises the Warrant. Accordingly, the Transaction resulted in a change of control of the Company.

The Transaction was subject to customary closing conditions, including, without limitation: (i) approval by the stockholders of Telkonet of an amendment to Telkonet’s Amended and Restated Articles of Incorporation (the “Amendment”) and the filing of the Amendment; (ii) the approval by the stockholders of Telkonet of the Issuance to effectuate the Transaction. The stockholders approved the Amendment and filing and the Issuance at the Special Meeting of Stockholders held on October 27, 2021.

On March 10, 2022, the Company entered into a fourteenth amendment to the Heritage Bank Loan Amendment to extend the revolving maturity date to June 30, 2023, unless earlier accelerated under the terms of the Heritage Bank Loan Agreement.