Telkonet Inc (fka TKO)

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For anyone interested (and I don't read everyday so apologies if this is already posted), here the details of the MSTI reverse merger:

http://biz.yahoo.com/e/070530/fitx8-k_a.html

30-May-2007

Entry into a Material Definitive Agreement, Completion of Acquisition or Di

Item 1.01 Entry into a Material Definitive Agreement

The Merger

On May 18, 2007, Fitness Xpress Software, Inc., a Nevada corporation ("FXSI-NV"), was merged with and into Fitness Xpress Software, Inc., a Delaware corporation ("FXSI-DE"), for the sole purpose of changing its state of incorporation to Delaware from Nevada pursuant to a Certificate of Ownership and Merger dated May 18, 2007 and approved by stockholders on May 18, 2007. Under the terms of the Certificate of Ownership and Merger, each share of FXSI-NV was exchanged for 1.0563380282 shares of FXSI-DE.

On May 22, 2007, FXSI-DE entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") by and among FXSI-DE, Microwave Satellite Technologies, a privately held New Jersey corporaton ("MST"), and Microwave Acquisition Corp., a newly formed, wholly-owned Delaware subsidiary of FXSI-DE ("Acquisition Sub"). Upon closing of the merger transaction contemplated under the Merger Agreement (the "Merger"), Acquisition Sub will be merged with and into MST, and MST, as the surviving corporation, will become a wholly-owned subsidiary of FXSI-DE. Pursuant to the Merger Agreement, following the merger FXSI-DE's name will be changed to MSTI Holdings, Inc.

In addition, pursuant to the terms and conditions of the Merger Agreement:

· Each share of MST common stock issued and outstanding immediately prior to the closing of the Merger will be converted into the right to receive 120,000 shares of FXSI-DE common stock. In addition, $5,000,000 of outstanding indebtedness of MST to Telkonet, Inc., a Utah corporation and MST's 90% shareholder prior to the Merger ("Telkonet"), will be converted at $1.00 per share into 5,000,000 shares of FXSI-DE common stock. As a result, an aggregate of 20,000,000 shares of FXSI-DE common stock will be issued to the holders of MST common stock.

· In a private placement (the "Private Placement"), taking place immediately after the closing of the Merger, FXSI-DE will issue units ("Units") consisting of 46,620 shares of FXSI-DE common stock and a five-year detachable redeemable warrant to purchase 23,310 shares of FXSI-DE common stock at an exercise price of $1.00 per share (the "Investor Warrant"), at a purchase price of $25,641 per Unit. The minimum authorized amount to be issued is $1,999,998 in 78 Units, and the maximum authorized amount to be issued is $3,999,996 in 156 Units.

· Concurrently with the Private Placement and the Merger, the Company will receive up to $7,500,000 (prior to the payment of placement agent fees) from the issuance of 8% Secured Convertible Debentures due April 30, 2010 (the "Debentures"), convertible at $0.65 per share into up to 12,541,806 shares of FXSI-DE common stock, and five-year warrants (the "Debenture Warrants") to purchase in the aggregate up to 6,270,903 shares of common stock at an exercise price of $1.00 per share.

· Immediately following the closing of the Merger, under the terms of an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, FXSI-DE will transfer all of its pre-Merger assets and liabilities to its wholly-owned subsidiary, FXS Holdings, Inc., a Delaware corporation ("SplitCo"). Thereafter, pursuant to a Stock Purchase Agreement, . . .

Item 2.01 Completion of Acquisition or Disposition of Assets

As used in this Current Report on Form 8-K, all references to the "Company," "we," "our" and "us" for periods prior to the closing of the Merger refer to MST, and references to the "Company," "we," "our" and "us" for periods subsequent to the closing of the Merger refer to FXSI-DE and its subsidiaries. Information regarding the Company, MST and the principal terms of the Merger are set forth below.

Merger

The Merger. On May 22, 2007, FXSI-DE entered into the Merger Agreement with MST and Acquisition Sub. Upon closing of the Merger on May 24, 2007, Acquisition Sub was merged with and into MST, and MST became a wholly-owned subsidiary of FXSI-DE.

Pursuant to the Merger Agreement, at closing the stockholders of MST received 120,000 shares of FXSI-DE's common stock for each issued and outstanding share of MST's common stock. In addition, $5,000,000 of outstanding indebtedness of MST to Telkonet was converted at $1.00 per share into 5,000,000 shares of FXSI-DE common stock. As a result, at the closing FXSI-DE issued 20,000,000 shares of its common stock to the former stockholders of MST, representing approximately 50.7% of FXSI-DE's outstanding common stock following (1) the closing of the Merger, (2) the closing of the Private Placement for $3,078,716.50 and (3) FXSI-DE's cancellation of 3,169,014 shares in the Split-Off, and taking into account the issuance of 10,117,462 shares of FXSI-DE common stock issuable upon conversion of the Debentures. See Item 3.02 below for a description of the Private Placement.

Before giving effect to the stock issuances in the Merger and the Private Placement, and after giving effect to the stock cancellation in the Split-Off, 3,788,874 shares of FXSI-DE common stock were outstanding. These shares constituted the part of FXSI-DE's "public float" prior to the Merger that will continue to represent the shares of FXSI-DE common stock eligible for resale without further registration by the holders thereof, until such time as the applicability of Rule 144 or other exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), permits additional sales of issued shares, or a further registration statement has been declared effective.

Prior to the closing, there were no options or warrants to purchase shares of capital stock of FXSI-DE or MST outstanding. Immediately prior to the Merger, the Company adopted a 2007 Stock Incentive Plan that will provide for the grant of up to 4,500,000 shares of common stock as restricted stock or stock options to employees, directors and consultants. Except for the 2007 Stock Incentive Plan, neither FXSI-DE nor MST had adopted an equity incentive plan or otherwise reserved shares for issuance as incentive awards to officers, directors, employees and other qualified persons in the future. Upon consummation of the Merger, the Company granted options to purchase 2,000,000 shares and 1,000,000 shares of common stock of the Company at an exercise price of $0.65 per share to its Chief Executive Officer, Frank T. Matarazzo, and its President, Ronald W. Pickett, respectively.

The shares of FXSI-DE's common stock issued to former holders of MST's capital stock in connection with the Merger, the shares of FXSI-DE common stock issued in the Private Placement, the Debentures, the shares issuable upon conversion of . . .

Item 3.02 Unregistered Sales of Equity Securities

In connection with the Merger, as of May 24, 2007, we accepted subscriptions for a total of 120.07 Units in the Private Placement, each Unit consisting of 46,620 shares of the our common stock, par value $0.001 per share and a detachable redeemable Investor Warrant to purchase 23,310 shares of common stock at an exercise price of $1.00 per share for a purchase price of $25,641 per Unit from accredited investors pursuant to the terms of a Confidential Private Offering Memorandum, dated May 7, 2007, as supplemented. We received gross proceeds from such closing of the Private Placement of $3,078,716.50.

As of May 25, 2007, we issued $6,576,350 Debentures that are convertible into an aggregate of 10,117,462 shares of our common stock at a conversion price of $0.65 per share and Debenture Warrants to purchase an aggregate of 5,058,730 shares of our common stock at an exercise price of $1.00 per share. The Debentures were issued with an 8% Original Issue Discount. As a result we received $6,050,000 from the issuance of the Debentures (before payment of the placement agent fees and other fees).

The Private Placement and the issuance of the Debentures was made solely to "accredited investors," as that term is defined in Regulation D under the Securities Act. The securities issued in the Merger, units and the common stock, the Debentures and the shares of common stock included therein were not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering.

Net proceeds received from the Private Placement and Debentures are expected to be used to pay-off the remaining indebtedness of approximately $1,000,000 to Telkonet as well as for research and development, sales and marketing, an investor relations program and repayment of debt and for working capital and other general corporate purposes.

We agreed to pay placement agents the following fees in connection with the Private Placement and the issuance of the Debentures: (i) a cash fee equal to 7% of the aggregate purchase price paid by each purchaser of Units in the Private Placement and Debentures, (ii) five-year warrants to purchase that number of shares of common stock equal to 7% of the common stock on which the cash fee is payable under clause (i) above, at an exercise price of $1.00 per share, with mandatory registration rights covering the shares of common stock underlying the warrants, and (iii) reimbursement for all reasonable out of pocket expenses incurred in connection with the engagement, including, but not limited to, the reasonable expenses of counsel, up to $25,000.

Description of Securities

Immediately following the Merger, the Split-Off and the closing of the Private Placement for $3,078,716.50, there were 29,386,538 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding.

Description of Common Stock

We are authorized to issue 90,000,000 shares of common stock, par value $0.001 per share. The holders of common stock are entitled to one vote per share on all . . .

Item 5.01 Changes in Control of Registrant

Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

FXSI-DE's sole officer and director resigned as of May 24, 2007, immediately following the closing of the Merger. Pursuant to the terms of the Merger Agreement, our new directors and officers are as set forth therein. Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On May 24, 2007, our board of directors approved an amendment to our certificate of incorporation, recommending a change of its name from "Fitness Xpress Software, Inc." to "MSTI Holdings, Inc." On May 24, 2007, stockholders representing the requisite number of votes necessary to approve an amendment to the certificate of incorporation took action via written consent, approving the corporate name change. On May 24, 2007, we filed the amendment to the certificate of incorporation with the Secretary of State of the State of Delaware.

On May 24, 2007, our board of directors approved a change in our fiscal year from a fiscal year ending April 30 to a fiscal year ending on December 31. The change in our fiscal year will take effect on May 24, 2007 and, therefore, there will be no transition period in connection with this change of fiscal year-end. Our 2007 fiscal year will end on December 31, 2007.

Item 5.06 Change in Shell Company Status

As a result of the consummation of the Merger described in Items 1.01 and 2.01 of this Current Report on Form 8-K, we believe that we are no longer a shell corporation as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired. In accordance with Item 9.01(a), MST's audited financial statements for the fiscal years ended December 31, 2005 and 2006 and MST's unaudited financial statements for the three-month interim periods ended March, 31, 2007 and 2006 are filed in this Current Report on Form 8-K as Exhibit 99.1 and 99.2 respectively.

(b) Pro Forma Financial Information. In accordance with Item 9.01(b), our pro forma financial statements are filed in this Current Report on Form 8-K as Exhibit 99.3.

(d) Exhibits.

The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

Exhibit No. Description

2.1 Agreement of Merger and Plan of Reorganization, dated as of May 22, 2007, by and among Fitness Xpress Software, Inc., Microwave Satellite Technologies, Inc., and Microwave Acquisition Corp. (1)

Later,
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