Ecosphere Technologies, Inc., a diversified water engineering and environmental services company, earlier today released a shareholder update and announced record fourth quarter revenue. The letter in its entirety is presented below.

To our shareholders,

I’d like to take this opportunity to thank all of our shareholders and the investment community for your support this past year. We are very pleased with the milestones that were achieved in 2009 and we strongly believe that 2010 will be a great year for the Company and our investors. We will continue to expand our “Total Frac Water Management” services in the natural gas industry, both domestically and internationally, through our majority owned subsidiary Ecosphere Energy Services. We will also be developing strategic partnerships to deploy our Ecosphere Ozonix technology in a wide variety of industrial and municipal wastewater applications.

2009-2010 Milestones:

– Formed and capitalized a new subsidiary named Ecosphere Energy
Services LLC (EES) to exclusively license and provide contract services for
the Ecosphere Ozonix technology for global energy applications.
– Completed five (5) revenue producing “water recycling” pilot programs
to demonstrate our Ecosphere Ozonix technology to three (3) major natural
gas exploration and production companies operating in Oklahoma, Utah,
Arkansas, and Wyoming.
– Our EES subsidiary secured two (2) long term service contracts with
Newfield Exploration and Southwestern Energy to provide our EcosFrac and
EcosBrine “Total Frac Water Management” services.
– The Company completed the shipment of the first twelve EcosFrac EF600
units to our subsidiary EES on November 15, 2009 to begin the EES long term
services contract with Southwestern Energy to provide our EcosFrac services
to eliminate biocides in frac water.
– EES completed five (5) biocide-free fracs at Southwestern Energy in
the month of December resulting in the highest month of operating revenues
in the Company’s history.
– The Company completed shipment of a second set of twelve EcosFrac
EF600 units to EES to service the Southwestern Energy contract on January
9, 2010.
– The Company generated over $1,000,000 in revenue for its fourth
quarter ended 12/31/09, up 250% from $310,555 in its third quarter ended
9/30/09 and up 778% from its fourth quarter ended 12/31/08. Over $500,000
of the revenue was generated in December alone.

Moving into 2010 we are very excited about the acceptance of and demand for our Ecosphere Ozonix technology by major energy companies in the natural gas industry. The recent advancements in horizontal drilling techniques for unconventional shale plays using hydraulic water fracturing (fracing) has presented the United States with an unparalleled opportunity to decrease our dependency on foreign fossil fuels and will allow us to transition to a cleaner burning fuel. One of the major challenges facing this transition is that the hydraulic fracing process uses millions of gallons of water to fracture each well.

Our EcosFrac, EcosBrine, and EcosStim technologies enable natural gas exploration companies to eliminate biocides in their frac water and also recycle their flowback waters at the well site. This solves a major industry challenge and opens up an enormous opportunity for the Company worldwide. Given these facts, we are reaffirming our 2010 revenue guidance of $20 million.

Here are our primary goals for 2010:

– Capture significant market share for our “Total Frac Water
Management” services within the Woodford, Fayetteville, Marcellus,
Haynesville, Eagle Ford, Bakken, and Barnett Shale’s as well as the
emerging International shale plays.
– Develop strategic relationships to advance our Ecosphere Ozonix
technology into other industrial and municipal waste water applications
domestically and internationally.
– Prepare to move up to the NASDAQ or NYSE/AMEX exchange.
– Increase our exposure within the brokerage community and to
institutional investors.

Again, I would like to thank all of our shareholders for their support and encourage everyone to visit our website at www.ecospheretech.com to keep up with the Company’s progress.

Sincerely,

Dennis McGuire
Chief Executive Officer