Just below the GRQ stuff in the 10Q, is a paragraph entilted 'Litigation". Please read this: .
Litigation
The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adversedecisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect onits financial position, results of operations or liquidity.Senior Convertible Noteholder ClaimThe August 14, 2006 Settlement Agreement with the Senior Convertible Debenture Noteholders provided that the number of shares issued tothe Noteholders shall be adjusted based upon the arithmetic average of the weighted average price of the Company’s common stock on theAmerican Stock Exchange for the twenty trading days immediately following the settlement date (Note E).
The Company has concluded that,based upon the weighted average of the Company's common stock between August 16, 2006 and September 13, 2006, the Company is entitledto a refund from the two Noteholders.
One of the Noteholders has informed the Company that it does not believe such a refund is required. Asa result, the Company has declined to deliver to the Noteholders certain stock purchase warrants issued to them pursuant to the SettlementAgreement pending resolution of this disagreement. The Noteholder has alleged that the Company has failed to satisfy its obligations under theSettlement Agreement by failing to deliver the warrants. In addition, the Noteholder maintains that the Company has breached certainprovisions of the Registration Rights Agreement and, as a result of such breach, such Noteholder claims that it is entitled to receive liquidateddamages from the Company.In the Company’s opinion, the ultimate disposition of these matters will not have a material adverse effect on the Company’s results ofoperations or financial position.
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MORE GRQ stuff in the 10Q
Senior Note Purchase AgreementOn July 24, 2007, Telkonet entered into a Senior Note Purchase Agreement with GRQ Consultants, Inc. (“GRQ”) pursuant to which theCompany issued to GRQ a Senior Promissory Note (the “Note”) in the aggregate principal amount of $1,500,000. The Note is due and payableon the earlier to occur of (i) the closing of the Company’s next financing, or (ii) January 28, 2008, and bears interest at a rate of six (6%)percent per annum. The Company has incurred approximately $25,000 in fees in connection with this transaction. The net proceeds from theissuance of the Note will be for general working capital needs. In connection with the issuance of the Note, the Company also issued to GRQwarrants to purchase 359,712 shares of Telkonet common stock at $4.17 per share. These warrants expire five years from the date of issuance.27
