Exhibit
99.1
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20374
Seneca Meadows Pkwy.
Germantown,
MD 20876-7004
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Phone:
240.912.1800
Fax:
240.912.1839
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February
21, 2007
To
our
Valued Shareholders,
We
have
started this year by issuing some key news releases that illustrate our
strategic direction and validate the
acceptance and effectiveness of Telkonet’s products. We thought it would be
beneficial to all of our shareholders to provide additional information
regarding these releases and the financial impact they will have on our
company’s operations.
In
the
government sector, orders are being generated and we are shipping products
to
various sectors of the federal government. In January, the US Patent and
Trademark Office (USPTO) within the Commerce Department awarded us a contract
worth approximately $200,000 to support the agency with the enhancement and
upgrade of its IT infrastructure and related networking apparatus. Also, we
have
deployed our first network for a US military system, which is now operational.
Based on the contracts to-date, management is estimating approximately $8.5
million in annual revenues from government sales, plus continuing annual service
fees, and should be able to quantify revenues from current contracts in the
second quarter. These revenues will be recognized upon shipment of
product.
Our
new
relationship with GE Energy opens the door to many new opportunities, largely
in
the utility field. With GE Energy’s plan to private label our product, which
enables remote monitoring and management of utility substation equipment,
management is expecting initial sales of approximately $1.5 million for
Telkonet’s existing product. GE Energy demonstrated our substation automation
product a couple of weeks ago in San Diego, California at DistribuTECH 2007,
the
largest energy trade show in the US.
GE
Energy
will initially roll out our existing product to a cross-section of North
American sites so we can further develop, refine and customize the product,
ensuring compatibility with all types of substation equipment, configurations
and substation environments. The customized product, which will also enable
video surveillance to meet the stringent security requirements for substations,
is expected to generate additional revenue once it is deployed in third
quarter.
Telkonet’s
relationship with GE Energy is an exclusive relationship for the utility market.
The initial sales of our existing product for market sampling should not be
viewed as indicative of the market. In addition to GE Energy, our substation
solution has been installed in other US utility substations, with successful
results - again validating our
solution and demonstrating its global appeal.
Finally,
our commercial strategy for the MDU and the hospitality market is on track
with
continued product validation,
as
evidenced by our recent contract to roll out our system to 50 additional Wyndham
by WorldMark timeshare properties. With the recent introduction of our energy
management product offering, Telkonet SmartEnergy, we will continue to build
market share, selling this solution to existing customers and creating a new
customer base.
Telkonet’s
current contracts and partnerships are expected to generate revenue to bring
the
company into positive cash flow in 2007. Depending on the actual product mix,
we
are estimating annual revenues to be approximately $25 million. Management
is
working diligently to establish timeframes for product installations and product
quantities, which are essential for financial implications and
planning.
The
versatility of our system is evident by the diverse range of installations
completed within the last year.
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Wyndham
by WorldMark timeshare resorts
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The
Queen Mary, California
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Trump
Tower, Trump Palace, Trump Park, Trump Park East, New
York
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Apartment
complexes in Washington, DC, with
EarthLink
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We
are
pleased to finally see the impact of our years of hard work and dedication.
We
believe the validations that Telkonet has recently achieved, along with the
prospect for future relationships, far exceeds the value of the individual
sales.
Sincerely,
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Pete Musser, Chairman |
Ron
Pickett, President and
CEO
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