November 14, 2008 08:00 ET

H2O Innovation Announces its 2008-2009 First Quarter Results - Sales and Gross Margin Growth

- Sales of $5,549,457, up 126% from $2,456,220 in 2007. - Gross margin of $1,352,926, up from $497,013 in 2007. - EBITDA increase at $29,927 compared to ($864,006) in 2007. - Significant reduction of net loss at $409,271 from $977,808 in 2007. - Operating activities generated $49,243 in cash for the period compared to a $780,600 use of cash in 2007.

QUEBEC CITY, QUEBEC--(Marketwire - Nov. 14, 2008) - H2O Innovation (2000) Inc. ("H2O Innovation" or the "Company")(TSX VENTURE:HEO)(ALTERNEXT:MNEMO:ALHEO) announces the first quarter results for fiscal year 2008-2009. During this period, H2O Innovation recorded 126% sales growth-mainly in the United States market-and a gross margin topping 20% for a fifth consecutive quarter.

Three-month period
ending September 30
(Unaudited) 2008 2007
Sales 5,549,457 2,456,220
Gross margin 1,352,926 497,013
Gross margin 24% 20%
EBITDA 29,927 (864,006)
Net loss for the period
and comprehensive results (409,271) (977,808)
Basic and diluted net
loss per share (0,009) (0,028)

For the three-month period ending September 30, 2008, sales increased by 126%, for a total of $5,549,457 compared to $2,456,220 for the same period ended September 30, 2007. Forty-two percent (42%) of this growth is organic; the remainder (58%) is related to the acquisitions of Sigma Environmental Solutions Inc., Wastewater Technologies, Inc. and Itasca Sytems, Inc. completed by the Company during the last year.

Gross margin amounted to $1,352,926 for the period, compared to $497,013 for the comparable period of 2007. Gross margin amounted to 24%, a 20% increase over the same period of the previous financial year. This is the fifth consecutive quarter in which H2O Innovation had a gross margin over 20%. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the quarter was $29,927, compared to ($864,006) for the same period ended September 30, 2007. The net loss has dropped significantly, from $977,808 ($0.028 per share) for the three-month period ended September 30, 2007, to $409,271 ($0.009 per share) for the same period ended September 30, 2008.

Before the change in operating working capital, operating activities generated $49,243 in cash for the period ended September 30, 2008 compared to a $780,600 use of cash for the comparable period ended September 30, 2007, marking a major increase in 2008 given the 126% jump in sales over 2007.


Acquisition in the United States

The first quarter of fiscal 2008-2009 was also marked by an important acquisition. In line with the objectives outlined in its strategic plan, the Company achieved higher market diversification through its acquisition of Itasca Systems Inc. a company located in Minneapolis (Minnesota, United States) that specializes in treating industrial wastewater using membrane filtration technology, in particular for the energy sector. This acquisition diversifies the services that the Company offers by enabling it to better serve the industrial sector, reduce its relative dependence on the municipal market, and maximize its business development potential.

Subsequent event

During the second quarter of fiscal 2008-2009, the Company announced has been awarded a contract by Petro-Canada Oil Sands Inc. on behalf of Fort Hills Energy L.P. to build six water treatment units for the Fort Hills mine (Alberta, Canada), which is under construction. This $9,400,000 contract is the biggest in H2O Innovation's history.

"This quarter was pivotal for H2O Innovation and much progress was made. The achievements reflect management's energy and ongoing efforts to meet Company development objectives. Over this period, management has taken actions that have already led to Company growth and that are an indication of its undertakings to generate positive cash flows and improve the Company's results" stated Frederic Dugre, President and CEO.

The first quarter financial report is available on the Company's Website (www.h2oinnovation.com) and on Alternext's site (www.alternext.fr). Additional information on the Company is also available on SEDAR (www.sedar.com).

About H2O Innovation

H2O Innovation's mission is to design, develop, produce and integrate state-of-the-art, environmental friendly products dedicated to the production of drinking water, the treatment of wastewater and industrial processed water, and the reclamation of water.

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 rejects any obligation to revise or update the prospective disclosures 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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