Telkonet, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

J. STOCK OPTIONS AND WARRANTS (Tables)

J. STOCK OPTIONS AND WARRANTS (Tables)

3 Months Ended

Mar. 31, 2015

Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]

Options Outstanding								Options Exercisable
Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.01 - $0.15		175,000		2.57	$	0.14		175,000	$	0.14
$	0.16 - $0.99		1,620,225		7.67		0.18		1,310,225		0.18
$	1.00 - $5.60		135,000		1.27		3.29		135,000		3.29
			1,930,225		6.76	$	0.40		1,620,225	$	0.44

Option activity

	Number of Shares			Weighted Average Price Per Share
Outstanding at January 1, 2014		1,735,225		$	0.43
Granted		200,000			0.19
Exercised		–			–
Cancelled or expired		(5,000	)		3.50
Outstanding at December 31, 2014		1,930,225		$	0.40
Granted		–			–
Exercised		–			–
Cancelled or expired		–			–
Outstanding at March 31, 2015		1,930,225		$	0.40

Valuation assumptions

Employee Stock Options

The Company maintains an equity incentive plan, (the “Plan”). The Plan was established in 2010 as an incentive plan for officers, employees, non-employee directors, prospective employees and other key persons. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a better alignment of their interests with those of the Company and its stockholders.

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees of the Company under the Plan.

Options Outstanding								Options Exercisable
Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.01 - $0.15		175,000		2.57	$	0.14		175,000	$	0.14
$	0.16 - $0.99		1,620,225		7.67		0.18		1,310,225		0.18
$	1.00 - $5.60		135,000		1.27		3.29		135,000		3.29
			1,930,225		6.76	$	0.40		1,620,225	$	0.44

Transactions involving stock options issued to employees are summarized as follows:

	Number of Shares			Weighted Average Price Per Share
Outstanding at January 1, 2014		1,735,225		$	0.43
Granted		200,000			0.19
Exercised		–			–
Cancelled or expired		(5,000	)		3.50
Outstanding at December 31, 2014		1,930,225		$	0.40
Granted		–			–
Exercised		–			–
Cancelled or expired		–			–
Outstanding at March 31, 2015		1,930,225		$	0.40

The expected life of awards granted represents the period of time that they are expected to be outstanding. We determine the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures. We estimate the volatility of our common stock based on the calculated historical volatility of our own common stock using the trailing 24 months of share price data prior to the date of the award. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. We have not paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model. We use historical data to estimate pre-vesting option forfeitures and record share-based compensation for those awards that are expected to vest. In accordance with ASC 718-10, we adjust share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience.

There were no options granted and no options exercised during the three months ended March 31, 2015 and 2014, respectively. Total stock-based compensation expense in connection with options granted to employees recognized in the condensed consolidated statements of operations for the three months ended March 31, 2015 and 2014 was $4,203 and $2,024, respectively.

Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock issued to non-employees of the Company.

		Warrants Outstanding						Warrants Exercisable
Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.13		7,230,778		0.87	$	0.13		7,230,778	$	0.13
	0.18		50,000		2.66		0.18		50,000	$	0.18
	0.20		250,000		6.53		0.20		250,000		0.20
	3.00		384,755		0.58		3.00		384,755		3.00
			7,915,533		1.04	$	0.27		7,915,533	$	0.27

Transactions involving warrants are summarized as follows:

	Number of Shares			Weighted Average Price Per Share
Outstanding at January 1, 2014		9,359,914		$	0.32
Issued		300,000			0.20
Exercised		–			–
Canceled or expired		(1,744,381	)		0.51
Outstanding at December 31, 2014		7,915,533			0.27
Issued		–			–
Exercised		–			–
Canceled or expired		–			–
Outstanding at March 31, 2015		7,915,533		$	0.27

There were no warrants granted, exercised, cancelled or forfeited during the three months ended March 31, 2015 and 2014.

Warrants outstanding and exercisable

		Warrants Outstanding						Warrants Exercisable
Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$	0.13		7,230,778		0.87	$	0.13		7,230,778	$	0.13
	0.18		50,000		2.66		0.18		50,000	$	0.18
	0.20		250,000		6.53		0.20		250,000		0.20
	3.00		384,755		0.58		3.00		384,755		3.00
			7,915,533		1.04	$	0.27		7,915,533	$	0.27

Warrant activity

	Number of Shares			Weighted Average Price Per Share
Outstanding at January 1, 2014		9,359,914		$	0.32
Issued		300,000			0.20
Exercised		–			–
Canceled or expired		(1,744,381	)		0.51
Outstanding at December 31, 2014		7,915,533			0.27
Issued		–			–
Exercised		–			–
Canceled or expired		–			–
Outstanding at March 31, 2015		7,915,533		$	0.27

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details