July 10, 2008 17:30 ET

H2O Completes a Financing of CA$ 1.5M

QUEBEC CITY, QUEBEC--(Marketwire - July 10, 2008) - H2O Innovation ("H2O")(TSX VENTURE:HEO)(Alternext : MNEMO : ALHEO) is pleased to announce that it has successfully completed today a private placement of CA$ 1,500,000 by means of a convertible debenture to SIPAR Inc. Given that its sales backlog is totalling more than CA$ 21M following the acquisition of Itasca Systems, Inc. completed on July 3, 2008 and capital requirements in the next few months for the completion of contracts, management of H2O has deemed it opportune to complete this financing, proceeds of which will be allocated to working capital.

H2O issued to SIPAR Inc. a convertible and unsecured debenture. The principal amount of the debenture will bear interest at the annual rate of 10%, starting from the disbursement date and the principal amount will be convertible, at the election of the holder, into common shares of H2O. The conversion price of the debenture will be CA$ 0.95 per share during the first two years and CA$ 1.045 per share for the third year following the issuance. Moreover, commencing the 24th month following the issuance of the debenture, if the weighted average trading price of H2O's common shares traded on the Exchange is superior to CA$ 1.25 for more than 20 days, H2O will be entitled to require the conversion of the principal amount of the debenture at the then applicable conversion price. Interest on the principal amount of the debenture will be payable by way of semi-annual instalments in July and in January of each year and the principal amount will be payable 36 months after the date of issuance of the debenture.

The securities issued pursuant to this private placement are subject to statutory resale restrictions for a period of four (4) months following the closing of the financing.

The private placement was made pursuant to exemptions from prospectus and registration requirements of applicable securities laws. The net proceeds from the financing will be allocated to working capital and other general corporate purposes of H2O.

About H2O

H2O's mission is to develop, manufacture and market innovative, environment-friendly, products intended for drinking water production, wastewater treatment and industrial processes.

Forward-Looking Statements

This press release contains forward-looking statements which reflect H2O's current expectations regarding future events. The forward-looking statements involve risks and uncertainties. Actual results could differ materially form those projected herein. H2O rejects any obligation to revise or update the forward-looking statements contained in this press release.

The TSX Venture Exchange and the Alternext Exchange assume no responsibility for the relevance or accuracy of this press release.

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