SecProbe.io

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                                                                  April 26, 2005

VIA EDGAR AND FAX
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Mr. Robert Carroll
Division of Corporate Finance
U.S. Securities & Exchange Commission
Washington, D.C. 20549

Re:  Telkonet, Inc.
     File No. 0-27305
     Form 10-KSB for Year Ended December 31, 2004
     --------------------------------------------

Dear Mr. Carroll:

         We are writing in response to your April 19, 2005 correspondence (the
"Comment Letter") concerning Telkonet, Inc.'s (the "Company") Form 10-KSB for
the year ended December 31, 2004. Set forth below are the Company's responses to
each comment contained in the Comment Letter. Paragraph numbers utilized below
correspond to those set forth in the Comment Letter.

         1. We acknowledge and understand the Company is no longer eligible to
use small business forms beginning with the Form 10-Q for the period ended March
31, 2005.

         2. The Company filed its Annual Report on SEC Form 10-KSB in accordance
with Regulation S-B. As a small business issuer, the Company is not required to
prepare financial statements in accordance with the disclosure requirements of
Regulation S-X(1). The Company acknowledges its obligation to comply with the
disclosure requirements of Regulation S-X beginning for the period ended March
31, 2005, and the Company intends to separately disclose revenues and costs of
revenues effective with the filing of its Form 10-Q for the period ended March
31, 2005.

--------------
(1) Item 310, Regulation S-B
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         3. The Company and the customer jointly determine that the product has
been delivered and no refund will be required when the product is installed by
the Company and accepted by the customer in writing.

         The Company considered the guidance provided by EITF 00-21 and since
none of its revenues resulted from multiple revenue-generating activities, the
Company determined its provisions were not applicable during the year ended
December 31, 2003 and 2004. The Company acknowledges that in the future it may
enter into arrangements under which it will perform multiple revenue-generating
activities, and will account for such activities in accordance with applicable
accounting principles generally accepted in the United States.

         Installation and support are not billed separately to the customer and
not considered separate units of accounting.

         Costs of products are capitalized and amortized ratably over the term
of the rental agreement, typically 36 months.

         There are no warranties provided with the purchase of the Company's
products. Defective products are replaced at no cost to the customer. The cost
of replacing defective products and product returns have been immaterial and
within management's expectations.

         4. In January 2004, Senior Note Holders requested that they be
permitted to purchase shares of the Company's common stock utilizing their
Senior Note as consideration. The notes have a term of three years, bear
interest at an annual rate of 8.0%, payable quarterly, and were not convertible.
The notes were issued with non-detachable warrants exerciseable at $1.00 per
share.

         The Company's Board of Directors approved this request by amending the
terms of the Senior Note for a limited time. The Company immediately notified
all of the outstanding Senior Note Holders of this temporary conversion option,
and indicated that it would accept the surrender of the Senior Notes as
consideration for the purchase of the Registrant's common shares at a price of
$2.10 per share. The conversion price represented the current market price of
the Company's common stock

         On January 23, 2004 the Company filed an 8-K with the SEC disclosing
the transaction(2).

         5. In the first week of January 2004, the Company agreed to compensate
a non-employee consultant for services related to the marketing of its products
in exchange for 1,000,000 shares of the Company's restricted common stock(3).
The Agreement called for certain performance milestones, which if not met, would
result in a forfeiture of a portion of the shares to the Company. In addition,
the Agreement required the consultant to pay a penalty to the Company should the
milestones not be met.

-------------------
(2) SEC Form 8-K, Dated January 23, 2004
(3) Commitment date defined by Paragraph of EITF 98-5

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         In valuing the services to be rendered, the Company considered FAS 123,
along with ETIF 96-18. While the Company believed there was a sufficient
disincentive for non-performance, the Company nonetheless used the fair market
value of the Company's common stock at the time of the performance commitment
date to value the shares and record a charge to operations of $2,500,000.

         The Registrant believes its policy accounting for non-employee equity
compensation costs incurred is reasonable and complies with current accounting
principles generally accepted in the United States.

         As required by the Comment Letter, the Company hereby acknowledges
that:

         1. The Company is responsible for the adequacy and accuracy of the
disclosure in the filings;

         2. Staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action with respect to
the filings; and

         3. The Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

         We believe the foregoing fairly responds to the Comment Letter. The
Company is prepared to provide to the staff any additional information required
by the staff in connection with it review.

         We thank you in advance for your assistance in this matter. If you have
any questions or additional comments, please do not hesitate to contact us.

                                             Sincerely,

                                             TELKONET, INC.

                                             /s/ E. Barry Smith
                                             --------------------------
                                             E. Barry Smith
                                             Chief Financial Officer

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