June 30, 2009 12:00 ET

H2O Innovation Announces a CAD$2.5 M Debt Financing

QUEBEC CITY, QUEBEC--(Marketwire - June 30, 2009) - H2O Innovation Inc. ("H2O Innovation" or the "Company") (TSX VENTURE:HEO)(ALTERNEXT:MNEMO:ALHEO) announces the closing of its previously announced debt financing by way of unsecured term loan for an aggregate amount of approximately CAD$2.522 million with a Canadian financial institution and certain individuals, including, among others, Mr. Richard A. Hoel and Mr. James Peterson (the "Lenders"). The principal amount bears interest at the annual rate of 11%, starting from the disbursement date and is repayable in equal monthly instalments form July 1st, 2010 to June 1st, 2014.

As additional consideration to the Lenders, H2O Innovation has issued a total of 1,250,000 common share purchase warrants (the "Warrants"). Each Warrant entitles the holder thereof to purchase one common share of the Company at a price of (i) CAD$0.80 for the first year, (ii) CAD$0.90 for the second year, (iii) CAD$1.00 for the third year, and (iv) CAD$1.10 for the fourth year. The Warrants will expire on June 30, 2013 and are subject to a statutory four-month hold period. A finder's fee of CAD$113,425 was paid to Desjardins Securities Inc. in relation to this financing.

Mr. Richard A. Hoel, Director of H2O Innovation and holder of more than 10% of the share capital of the Company, and Mr. James Peterson, Chief Operating Officer of H2O Innovation, have participated in this financing by providing the Company with loans in the amount of US$201,502 and US$80,610 for which they have respectively received a number of 111,945 and 44,783 Warrants.

The net proceeds of this financing will be used for the payment of a portion of the purchase price for the recent acquisition of Professional Water Technologies, Inc., and all ancillary transaction costs. The net proceeds will also be used by the Company's to pursue its growth following the acquisition, over and above the Company's working capital requirements-which are now met with cash generated from operating activities-and to maximize its future growth opportunities.

Prospective disclosures

This press release may contain prospective disclosures representing current expectations of H2O Innovation and are subject to certain risks and uncertainties. For details of these risks and uncertainties please refer to the Company's Annual Information Form dated September 26, 2008 available on SEDAR (www.sedar.com). H2O Innovation is under no obligation to revise or update the prospective disclosures contained in this press release.

About H2O Innovation

Exclusively dedicated to water treatment, H2O Innovation is establishing itself as a key player in sustainable development and the field of clean technologies. H2O Innovation designs, develops, produces, and integrates state-of-the-art water treatment systems for the production of drinking water, the reclamation of water, the treatment of wastewater and industrial processed water in the municipal, commercial, pharmaceutical, industrial, mining, and energy markets. H2O Innovation has approximately 100 employees and eight offices including two manufacturing and assembly plants in Canada and the United States. Shares of H2O Innovation are listed on the TSX Venture Exchange (HEO) as well as on the NYSE Euronext Alternext Exchange (MNEMO:ALHEO).

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) nor the Alternext Exchange accepts responsibility for the adequacy or accuracy of this release.

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