The $10 million cash and stock transaction will allow Telkonet to provide a "triple-play" solution to subscribers of HDTV, VoIP telephony and Internet access.

The business strategy is to expand the existing operations concentrated in Manhattan throughout New York and to increase the Telkonet presence in other cities using the New York system as a template. By adding MST to Telkonet's existing business, the Company will establish a subscriber base with recurring revenues. MST's revenues for the fiscal year ending April 30, 2005 were $3.5 million.

Ronald W. Pickett, President and CEO of Telkonet stated; "This strategic acquisition will enable Telkonet to provide a complete Internet solution, including NuVision Broadband, to commercial multi-dwelling units and hotels. We have worked closely with MST for the past 11 months in New York, installing the MST NuVision Broadband service using Telkonet's unique power line communications solution for broadband Internet access. An example of a very successful installation is at Trump Place on the Upper West Side of Manhattan.

"We are extremely enthusiastic about MST's Interactive Wi-Fi hot-zone system which currently offers wireless Internet service and blankets a large portion of New York's Central Park. This system transmits the signal to a roof top receiver, which utilizes Telkonet's powerline carrier (PLC) technology as the backbone within the building to distribute voice, video and data to the customers' apartment buildings, hotels, and business environments. "The ability to combine the Telkonet IP technology with the network capabilities of the MST solution creates a fully scalable and viable way to bundle services to existing network subscribers. We now have a perfect solution for the millions of multi-dwelling residents and multi-dwelling unit (MDU) owners who are searching for a complete voice, video and data package solution for their properties, while at the same time enabling Telkonet to build a valuable base of subscribers nationally".

Frank Matarazzo, President and Founder of MST said, "The Telkonet iWire System is a complete Internet Protocol (IP) platform, which, in combination with the MST network, will enable a variety of Internet-based solutions and services. We are excited about Telkonet's breakthrough technology because we can provide a broadband network throughout an entire building within a few days without the expense and delay of installing new wiring."

"The Telkonet solution is currently being deployed to replace the previously installed cable modem solution, which provided only limited connection options within each apartment. With Telkonet's system, residents are no longer confined to accessing their broadband connections at limited locations. Instead, they can enjoy broadband access from every electrical outlet in their apartment. "Telkonet's unique PLC product has lowered our deployment and operating costs, shortened and simplified our installation process, while providing residents with the flexibility of a wireless system and the security of a wired system. Using the Telkonet platform, we will be able to offer video, VoIP, and ultra-high speed Internet service to thousands of residents in the multi-dwelling units we serve, as well as enable a host of other Internet protocol-based services, including IPTV, smart building applications including energy management, Wi-Fi deployment, and security solutions."

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