**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





FORM
      10-K/A


(Amendment
      No. 1)





Annual
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934




FOR
      THE FISCAL YEAR ENDED DECEMBER 31,
      2005





Commission
      file number: 000-27305





**TELKONET,
      INC.**


(Exact
      name of registrant as specified in its charter)





Utah
            
            87-0627421(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employee Identification No.)





20374
      Seneca Meadows Parkway


Germantown,
      MD 20876


(Address
      of principal executive offices)





(240)
      912-1800


(Issuer’s
      telephone number)





Securities
      Registered pursuant to section 12(g) of the Act:  None





Indicate
      by check mark if the registrant is a well-know seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


__Yes X No





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(b) of the Act.


__
      Yes X No





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during
      the preceding 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days.


X Yes
      ___No





Check
      if
      disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
      contained in this form, and no disclosure will be contained, to the best of
      Registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See the definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.





___
                Large Accelerated Filer
            XAccelerated
                Filer
            ___
                Non-Accelerated Filer





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)


__
      Yes X No





Aggregate
      market value of the voting stock held by non-affiliates of the registrant as
      of
      March 1 2006: $155,184,856


Number
      of
      outstanding shares of the registrant’s par value $0.001 common stock
      a s
      of
      March 1, 2006: 46,316,539.





**EXPLANATORY
      NOTE**





Telkonet,
      Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A
      (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year
      ended December 31, 2005, which was originally filed on March 16, 2006
      (the “Original Filing”), to amend and restate in its entirety Part II,
      Item 9A—Controls and Procedures, to include management’s report on internal
      control over financial reporting, which was inadvertently omitted from the
      Original Filing. The Report from the Independent Registered Public Accounting
      Firm, which has not been amended, is included as originally filed.





This
      Amendment amends and restates in its entirety only the Part II, Item 9A—Controls
      and Procedures. This Amendment does not affect any other parts of, or exhibits
      to, the Original Filing, and those unaffected parts or exhibits are not included
      in this Amendment.





This
      Amendment continues to speak as of the date of the Original Filing and the
      Company has not updated the disclosure contained herein to reflect events that
      have occurred since the filing of the Original Filing. Accordingly, this
      Amendment should be read in conjunction with the Company’s other filings, if
      any, made with the Securities and Exchange Commission subsequent to the filing
      of the Original Filing, including any amendments to those filings, if
      any.





**PART
      II**





**ITEM
      9A.**  **CONTROLS
      AND PROCEDURES.**




***Evaluation
      of Disclosure Controls and Procedures*** **.** Under
      the supervision and with the participation of our management, including our
      Chief Executive Officer and Chief Financial Officer, we evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures (as such term is defined in Rule 13a-15(e) under the Securities
      Exchange Act of 1934 (the “Exchange Act”)). Disclosure controls and procedures
      are the controls and other procedures that we designed to ensure that we record,
      process, summarize and report in a timely manner the information we must
      disclose in reports that we file with or submit to the Securities and Exchange
      Commission under the Exchange Act. Based on this evaluation, our Chief Executive
      Officer and our Chief Financial Officer concluded that our disclosure controls
      and procedures were effective as of the end of the period covered by this
      report.





***Changes
      in Internal Control over Financial Reporting*** **.** During
      the fourth quarter of 2005, there was no change in our internal control over
      financial reporting (as such term is defined in Rule 13a-15(f) under the
      Exchange Act) that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





***Management
      Report On Internal Control over Financial Reporting.*** Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is
      defined in Rule 13a-15(f) under the Exchange Act as a process designed by,
      or
      under the supervision of, our principal executive and principal financial
      officers and effected by our board of directors, management and other personnel,
      to provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with accounting principles generally accepted in the United States of America
      and includes those policies and procedures that:





•
            
            pertain
                to the maintenance of records that, in reasonable detail, accurately
                and
                fairly reflect the transactions and dispositions of our
                assets;





•
            
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with accounting
                principles generally accepted in the United States of America, and
                that
                our receipts and expenditures are being made only in accordance with
                authorization of management and directors;
                and





•
            
            provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of our assets that could
                have
                a material effect on the financial
                statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





Under
      the
      supervision and with the participation of our management, including our
      principal executive and principal financial officers, we assessed, as of
      December 31, 2005, the effectiveness of our internal control over financial
      reporting. This assessment was based on criteria established in the framework
      in *Internal Control-Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission. Based
      on our assessment, our management concluded that our internal control over
      financial reporting was effective as of December 31, 2005.




Our
      assessment of the effectiveness of our internal control over financial reporting
      as of December 31, 2005 has been audited by Russell Bedford Stefanou Mirchandani
      LLP, an independent registered public accounting firm, as stated in their report
      which is included in this Annual Report on Form 10-K/A.










**SIGNATURE**






Pursuant
      to the requirements of Section 13 or 15(d)of the Securities Exchange Act of
      1934, the registrant has duly caused this amended report to be signed on its
      behalf by the undersigned, thereunto duly authorized.






TELKONET,
              INC.By:
            /s/ E.
              Barry
              SmithE.
                Barry Smith
              Chief Financial
                Officer




Date:
      March 29, 2006











RUSSELL
      BEDFORD STEFANOU MIRCHANDANI LLP


CERTIFIED
      PUBLIC ACCOUNTANTS





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Board
      of
      Directors


Telkonet,
      Inc.


Germantown,
      MD




We
      have
      audited management's assessment, included in the accompanying Management's
      Report on Internal Control over Financial Reporting, that Telkonet, Inc. and
      its
      wholly-owned subsidiary (the Company) maintained effective internal control
      over
      financial reporting as of December 31, 2005, based on criteria established
      in *Internal Control-Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      The Company's management is responsible for maintaining effective internal
      control over financial reporting and for its assessment of the effectiveness
      of
      internal control over financial reporting. Our responsibility is to express
      an
      opinion on management's assessment and an opinion on the effectiveness of the
      Company's internal control over financial reporting based on our
      audit.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management's assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.




A
      company's internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company's internal control
      over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company's
      assets that could have a material effect on the financial
      statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




In
      our
      opinion, management's assessment that Telkonet, Inc. and its wholly-owned
      subsidiary maintained effective internal control over financial reporting as
      of
      December 31, 2005, is fairly stated, in all material respects, based on criteria
      established in *Internal
      Control Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
      Also, in our opinion, Telkonet, Inc. and its wholly-owned subsidiary,
      maintained, in all material respects, effective internal control over financial
      reporting as of December 31, 20005, based on criteria
      established *in
      Internal Control-Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission
      (COSO).




We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of Telkonet,
      Inc. and its wholly-owned subsidiary as of December 31, 2005 and 2004, and
      the
      related consolidated statements of losses, stockholders' equity, and cash flows
      for the three-years ended December 31, 2005, and our report dated February
      2,
      2006 expressed an unqualified opinion on those consolidated financial
      statements,







/s/
      RUSSELL BEDFORD
      STEFANOU MIRCHANDANI LLP





Russell
      Bedford
      Stefanou Mirchandani LLP


Certified
      Public
      Accountants








McLean,
      Virginia


February
      2, 2006