EXHIBIT 99.1
KRONOS ADVANCED TECHNOLOGIES, INC.
Daniel R. Dwight
President and Chief Executive Officer
June 21, 2005
To the Shareholders of Kronos Advanced Technologies, Inc.:
I am pleased to report on the current status of Kronos Advanced Technologies and
to personally thank you for your continued support. As the Kronos Management
Team looks ahead to the impact the expansion our resources, product claims
platform, and intellectual property will have on the Company, the Team becomes
more energized and excited about Kronos' future.
Before commenting further on the status of the Company, I must first acknowledge
the frustration I've had with (i) the length of the "quiet period" Kronos had
endured while the SEC reviewed our recent SB-2 filings and (ii) the time it has
taken to get a Kronos-based product to market. Both of these matters have become
catalysts for two critical strategic changes in the Company, changes I believe
will have a profoundly positive impact on our business going forward.
On June 14, 2005, the U.S. Securities and Exchange Commission declared Kronos'
SB-2 Registration Statement effective. As we end our six month "quiet period,"
this letter represents the beginning of a more active public and investor
relations process that Kronos is implementing to not only keep our shareholders
current on recent developments but to better promote the Company in public
forums. Kronos is actively seeking out publications, product expositions and
other public venues for promoting our proprietary technology. In this regard,
Kronos is featured in the June issue of Appliance Design and will be featured in
an upcoming issue of IEEE Dielectrics and Insulation and at the June Annual
Conference of the Electrostatics Society of America.
Much to our frustration and yours, we have had a delay in bringing Kronos-based
products to market, in particular the HoMedics consumer product. Although
situations such as these are to be expected when developing a technology as
potentially revolutionary as that of Kronos', we have made critical changes in
our deployment of resources to address the delay.
Our key assumption, when we began commercializing the Kronos technology, was
that Kronos would develop and provide the technology and our partners would
develop the products, as well as the manufacturing, marketing and distribution
forum. However, our experience has taught us that it is far more effective --
and ultimately necessary -- that Kronos to be an integral part of both the
application and product development process. This realization translates
directly to Kronos' need to become both an application development and licensing
company.
As an application development company, Kronos is changing how we operate and the
skills we need to succeed. Through the direct use of the Cornell funding we
received in December, Kronos has begun to expand our product development
resources, including our human resources, equipment and software. As a result,
Kronos has repositioned the business to take a more active leadership role in
the application and product development process with our partners.
Application and Product Development Team: Kronos formed an Application and
Product Development Team (Vladimir Bibikov, Vlad Korolyov, Igor Krichtafovitch,
Chris Martin, Jacob O'Harah, Terence Tam, and Mike Ziomkowski). We believe the
skill base on this Team better positions the Company to apply the Kronos
technology directly to the design, development and assembly of Kronos products.
Software Simulation: In order to make the Application and Product Development
Team more productive, Kronos is developing the capability to simulate the air
movement and filtration capability of the Kronos technology in various product
configurations. This simulation capability reduces the time and cost burden of
building devices via trial and error. Our capability in this area is directly
related to our recruitment last year of Dr. Sergey Karpov, Senior Software
Engineer. We believe that further enhancements in Kronos simulation software by
Dr. Karpov will enhance the Company's overall application and product
development success rate.
Electronics Development Team: A key component of the Kronos technology is the
electronics used to generate and manage the high voltage field, to ensure the
safety of the product and to allow the user to maximize the air movement,
filtration and sterilization capability of the Kronos technology. Kronos has
recently combined our electronics team (Messrs. Bibikov, Krichtafovitch,
O'Harah, and Ziomkowski) with the design and product development resources of
Tech En, Inc. (a contract design firm that specializes in refinement of existing
electronic products). This combination of skills and resources has resulted in
Kronos reducing the size of the power supply by one half and the number of
components by one third compared to our first generation electronics. This
effort not only translates directly into lower cost, but allows Kronos to
develop even smaller size air movement, filtration and sterilization devices.
Equipment and Software Purchases: Kronos is either acquiring or building
internally various production and testing equipment and software to allow our
Application and Product Development and Electronics Teams to design, build and
test in limited quantities Kronos products.
The specific impact of these enhancements to Kronos' application and product
development capabilities are discussed in more detail below.
Application and Product Development
We have not changed our belief that one of the most significant drivers of
building a successful business is the ability to establish relationships with
key strategic partners; partners who have the vision, financial resources, and
product development, marketing, sales and distribution capabilities to integrate
the Kronos technology into products that can be mass marketed. Although we
continue vigorously pursuing a wide variety of new partnership opportunities, we
recognize that with each partnership Kronos will need to play a more integrated
role in the application and product development process. We believe that Kronos'
technology holds the potential for a virtually limitless number of applications
through both its standalone and embedded product platforms.
Standalone Product Platform
We believe that the potential for the Kronos technology to be used as a
standalone air purifier will be magnified by the ability of Kronos to
demonstrate that our air purification products have a higher cleaning efficiency
than other products on the market today. For example, while Sharper Image claims
collecting efficiency for small particles of about 0.3 micron is about 60% for
their consumer, air purification technology(1), Kronos' collecting efficiency
for 0.3 micron size particles is greater than 99.98%(2). Along with better
collecting efficiency, Kronos also provides the ability to destroy biohazards,
bacteria and viruses. Our strategy is to exploit the robustness of the Kronos
technology to improve Indoor Air Quality (IAQ) through the development of
Kronos-based air purification products in conjunction with key strategic
partners.
Consumer Products: We believe that Kronos' standalone product platform is coming
closer to fulfilling its potential to revolutionize the residential air movement
and purification market. The Indoor Air Quality market is growing at a
tremendous rate. Seeking to take advantage of the substantial potential for
consumer products, Kronos executed a Licensing Agreement with HoMedics, a
leading provider of health and wellness products. The agreement provides for
exclusive North American, Australian and New Zealand retail distribution rights
for standalone consumer air purification products.
In February 2005, Kronos and HoMedics began expanding production development
beyond the initial prototypes and initiated increased product testing to
complete the product claims platform. In conjunction with this effort, Kronos
has taken on a leadership role in the completion of the design and development
process for the product to ensure the product is able to deliver the full
benefits of the Kronos technology to the consumer.
Over the past several months, this effort has resulted in the completion of a
modified product design and the production and assembly of a limited number of
new devices that incorporate this modified design, as well as a new generation
of electronics. The design was modified to limit the level of air that can pass
through the device without being properly cleaned by a mass produced Kronos
product. When completed, the products will be distributed by HoMedics, which
currently distributes its products through major domestic retailers, including
Wal-Mart, Home Depot, Sears, Bed Bath & Beyond, and Linens 'N Things.
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(1) Based on Shaper Image patent application and corroborated by in-house Kronos
testing.
(2) Based on independent laboratory testing by LMS Technologies, Inc.
Commercial and Other Standalone Products: In addition, Kronos is seeking to
leverage its consumer product development work to market and sell a commercial
line of standalone air purifiers. This commercial line of Kronos-based air
purifiers will seek to address the specific air quality issues, including odors,
bacteria and viruses, found in most nursing home and assisted living, healthcare
and other commercial facilities. Kronos has begun build its own standalone line
of demonstration products that can be used as air purifiers, space heaters,
disinfectors, deodorizers and/or fans. These devices are currently undergoing
testing and evaluation. The Company intends to install Kronos standalone
commercial air purifiers in select nursing home, assisted living and hospitality
facilities in North America for demonstrating the benefits of the Kronos
technology to the commercial marketplace.
Embedded Product Platform
We believe that the potential for Kronos technology to be incorporated into
other products - making those products better, more efficient and more effective
- - is vast. Kronos embedded applications platform offers an unmatched range of
opportunities from commercial and residential air movement and filtration
products to military applications on ships and submarines to transportation,
products including airplanes and automobiles, to cooling microprocessors. Led by
Rich Tusing, our Chief Operating Officer, Kronos has entered into or is actively
seeking to enter into strategic partnerships that should allow us to develop and
market some of these applications.
Residential and Commercial Products: To exploit the Kronos technology in the
embedded commercial and residential marketplace, Kronos strategy is twofold: (i)
actively seek one or more strategic partners to develop, manufacture and market
embedded air purifiers and (ii) design and develop larger size devices for
customer testing and evaluation. Over the past several months, Kronos has made
material progress in the initial execution of this strategy:
In order to effectively market and distribute the Kronos technology to the
embedded commercial and residential markets, Kronos has initiated discussions
with various suppliers of commercial, industrial and residential air movement
and filtration products. These suppliers tend to be large multi-national
companies with global product development and production, marketing, sales
and/or distribution capability.
We believe that the Kronos technology offers distinct advantages over the
current products being used to serve the commercial and residential air
filtration markets. In the residential market, Kronos offers a variety of
application solutions as an alternative to traditional air movement and
filtration devices. In May 2005, we initiated a strategic relationship with
IKEA, a world leading furnishing retailer. Kronos and IKEA plan to co-develop
new consumer products that embed Kronos' silent, air movement, purification and
sterilization technology into other products and devices for residential use.
In the commercial market, Kronos technology can provide better than HEPA level
filtration without some of the significant drawbacks of current HEPA filtration
systems. HEPA filters require high levels of air pressure in order to force air
through the filtration mechanism. This means using large fans that produce noise
as well as consume large quantities of energy. Conversely, Kronos technology
generates air flow and contributes positive pressure, thereby reducing the
energy load on the air handling system and enabling building filtration without
modifying the existing HVAC system. HEPA filters also create a condensed
biohazard through the accumulation of live particles on the filtration medium;
Kronos technology eliminates these biohazards.
We believe these market advantages mean Kronos-based devices can be sold to (i)
existing commercial, residential and industrial facilities that cannot install
HEPA filtration because the facilities do not meet the static pressure
requirements from their fan-based air handling system; (ii) existing and new
facilities that are seeking the added benefit of biohazard protection; and (iii)
facilities that seek improved energy efficiency.
In order to fully demonstrate the Kronos technology in larger scale
applications, Kronos is designing and building commercial size devices. These
devices are being built to successfully meet the HVAC industry's ASHRAE 52.2
testing standard for filtration. Because Kronos has successfully tested its
smaller standalone product under ASHRAE 52.2 testing standards, we expect
similar success with our new commercial size devices.
Transportation Products: To exploit the Kronos technology in the transportation
marketplace, Kronos strategy is to use our success in designing and building an
embedded air mover and purifier product for a premier business jet manufacturer
and an air mover for the U.S. Navy, to actively seek other strategic partners to
initiate development of Kronos air purifiers for the aviation and automobile
industries.
Following a delay due to the customer's resource constraints, Kronos has resumed
building an embedded air movement and filtration devices for a premier business
jet manufacturer. The Kronos devices have been designed under this contract to
meet all FAA safety standards, including environmental, flammability and
electromagnetic interference (EMI).
A future potential commercial line of Kronos-based air handlers and purifiers
would attempt to address the specific air quality issues, including exhaust and
viruses, found in enclosed spaces occupied by multiple people for extended
periods of time, while providing more efficient air movement within unique space
constraints.
Military Products: Kronos strategy in the military marketplace is to continue to
use on a selective basis U. S. Department of Defense resources to develop, test
and evaluate the Kronos technology for various military and homeland security
applications. Based on the success of these select efforts, Kronos intends to
work with one or more defense contractors to mass produce these applications.
For example, Kronos recently completed designing and building a product for use
in a unique, U.S. Navy environment that would provide a more efficient HVAC air
handling system for naval ships. This effort was funded through a U. S. Navy
Small Business Innovation Research Phase II contract. In May 2005, Kronos
shipped the product to Northrop Grumman for testing and evaluation.
Microelectronics Cooling Products: Kronos strategy is to lay the initial ground
work for our vision of the Kronos technology as a viable alternative solution
for cooling microelectronics. In December 2004, the Washington Technology Center
awarded funding for a research and technology development project for Kronos and
the University of Washington to develop an improved microchip air handling
system. Over the past several months, Kronos and the University of Washington
initiated research into the development of an energy-efficient heat transfer
technology.
Product Claims Platform
As the awareness of Indoor Air Quality (IAQ) continues to grow and people become
more aware that the hazards of poor IAQ goes beyond just dust particles, Kronos
is seeking to establish an industry leadership position in setting the standard
for biohazard, bacteria and virus removal from the air stream we breath. Led by
Dr. Vladimir Gorobets, our Senior Engineer, Kronos' is obtaining further
verification of our product claims platform through university, government,
commercial and other independent testing sources.
To date, independent laboratory testing has verified the filtration and
sterilization capability of the Kronos technology.
Filtration Testing Results:
o LMS Industries - removal of over 99.97% of 0.1 micron and above size
particles using HVAC industry's ASHRAE 52.2 testing standard for
filtration;
o MicroTest Laboratories - HEPA Clean Room Class 1000 quality particulate
reduction;
o Intertek - tobacco smoke elimination tests, which demonstrated a Clean
Air Delivery Rate (CADR) for the Kronos air purifier of over 300 for
the larger size Kronos air purifier and 80 for the smaller size using
consumer filtration testing standards for the Association of Home
Appliance Manufacturers (AHAM).
Sterilization Testing Results:
o New Hampshire Materials Laboratory - up to 95% reduction of hazardous
gases, including numerous contaminants found in cigarette smoke;
o Battelle PNNL - 95% destruction of Bg (anthrax simulant);
o Dr. Sergey Stoylar, a bacteriologist from the American Bacteriological
Society - 100% destruction of Bacillus subtilis 168 (bacteria simulant)
at air velocities up to 725 feet per minute.
Along with increased IAQ awareness is an increase in the consumer's
understanding of effective and ineffective air purifiers and some of the
potentially harmful side effects of some of these products sold in the market
today. For example, as recently highlighted in the May issue of Consumer
Reports, ionizing air cleaners could expose users to lung-damaging levels of
ozone, a normal bi-product of ion based electrostatic air filters. Kronos has
demonstrated the ability to minimize the production of ozone to safe levels
acceptable to the most stringent requirements of the Environmental Protection
Agency and in accordance with Underwriters Laboratory standards. Kronos'
innovative solution for generating highly dense ion production necessary to move
and purify large volumes of air while ensuring a limited ozone concentration
(patents pending) is well within the "Good" range (as defined by the EPA) and
creates a distinct competitive advantage for Kronos air purifiers.
Intellectual Property
Under the leadership of our Chief Technology Officer, Dr. Igor Krichtafovitch,
Kronos continues to seek out innovative ways to improve on the core Kronos
technology, as well as new and innovative applications for our proprietary
technology. This effort includes the constant filing of new patent applications.
To date, Kronos has received notification that seven of these patents
applications have been allowed for issuance by the United States Patent and
Trademark Office. Our intellectual property process is very much a collaborative
effort and many members of the Kronos team have either received patents (Drs.
Gorobets and Krichtafovitch) or have patents pending (Messrs. Bibikov, Gorobets,
Krichtafovitch, Martin, O'Harah and Tam).
Fiscal 2005 Outlook
We firmly believe that Kronos is well positioned for future growth. In
accordance with our Standby Equity Distribution Agreement, we have access of up
to $20 million in capital from Cornell Capital to meet our development needs. We
have in select markets and are actively seeking to expand in other markets,
partners with the vision, resources and capabilities to integrate Kronos
technology into viable products, with a particular focus on residential and
commercial air filtration and on partners with the long term vision to integrate
Kronos technology into products with longer product development life cycles
(e.g., aviation, automotive and information technology). We believe that
combining these partners' skills with our recent expansion of our own
application and product development resources, product claims platform and
intellectual property position has better positioned our Company to succeed in
bringing Kronos-based air movement, filtration and sterilization products to
market.
As a result, the recently expanded Kronos Team is more excited than ever about
the Company's prospects for generating sustainable revenue growth and our
ability to bring value to our stockholders. Again, thank you for your continued
support of Kronos Advanced Technologies and we look forward to seeing our
shareholders at Kronos' next Annual Meeting this fall.
Best regards,
/s/ Daniel R. Dwight
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Daniel R. Dwight