Telkonet, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

K. STOCK OPTIONS AND WARRANTS (Tables)

K. STOCK OPTIONS AND WARRANTS (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

The following table summarizes the changes in options outstanding and the related exercise prices for the stock options 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		3.82	$	0.14		175,000	$	0.14
$	0.16 - $0.99		1,420,225		8.73		0.18		1,195,225		0.18
$	1.00 - $5.99		140,000		2.45		3.29		140,000		3.29
			1,735,225		7.73	$	0.43		1,510,225	$	0.47

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

	Number of Shares			Weighted Average Price Per Share
Outstanding at January 1, 2012		685,000		$	1.45
Granted		915,642			0.19
Exercised		–			–
Cancelled or expired		(320,000	)		1.16
Outstanding at December 31, 2012		1,280,642		$	0.62
Granted		504,583			0.18
Exercised		–			–
Cancelled or expired		(50,000	)		2.69
Outstanding at December 31, 2013		1,735,225		$	0.43

Fair value of options granted

The following table summarizes the assumptions used to estimate the fair value of options granted during the years ended December 2013 and 2012, using the Black-Scholes option-pricing model:

	2013		2012
Expected life of option (years)		10		10
Risk-free interest rate		1.72%		1.64-2.22%
Assumed volatility		124%		95-105%
Expected dividend rate		0		0
Expected forfeiture rate		6%		17%

Warrants

The following table summarizes the changes in warrants outstanding and the related exercise prices for the warrants 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		2.11	$	0.13		7,230,778	$	0.13
	0.33		1,628,800		0.88		0.33		1,628,800		0.33
	3.00		500,336		1.61		3.00		500,336		3.00
			9,359,914		1.87	$	0.32		9,359,914	$	0.32

Transactions involving warrants are summarized as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding at January 1, 2012		14,921,920		$	0.50
Issued		–			–
Exercised		(3,115,390	)		0.13
Canceled or expired		(976,114	)		2.20
Outstanding at December 31, 2012		10,830,416		$	0.45
Issued		–			–
Exercised		(86,472	)		0.13
Canceled or expired		(1,384,030	)		1.36
Outstanding at December 31, 2013		9,359,914		$	0.32

- 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.

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