Kelso Technologies Inc.: First Quarter Ended November 30, 2011

VANCOUVER, BRITISH COLUMBIA and LISLE, ILLINOIS--(Marketwire - Feb. 28, 2012) - Kelso Technologies Inc. (The "Company" or "Kelso") (TSX VENTURE:KLS)(OTCQX:KEOSF) -

Kelso reports that the Company has released its condensed interim consolidated financial statements and management discussion & analysis for the three months ended November 30, 2011. The financial statements have been prepared for the first time in accordance with the new International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. As part of the Company's transition to IFRS all amounts herein are expressed in United States dollars (the Company's functional currency) unless otherwise indicated.

The financial results for the three months ended November 30, 2011 are indicative of a company with new industrial products being introduced into an old and established railroad marketplace. The financial results reflect Kelso's early distribution of its external pressure relief valves ("EPRV") to the retrofit/repair sector of the railroad equipment supply market. Results also reflect the higher costs of marketing new products, low volume production and investments in human resources. The strategic plan for commercialization has required Kelso to make considerable investments in production infrastructure and pre-sales marketing programs for both its EPRV and new Kelso Klincher™ ("KKS") manway system well in advance of initial revenue from rail tank car manufacturers ("OEM").

Results of Operations

For the three months ended November 30, 2011, the Company recorded a loss of $439,986 against revenue of $180,240 compared to a loss of $229,872 against revenue of $113,488 for the three months ended November 30, 2010.

Included in the loss for the three months ended November 30, 2011 was the measure of the non-cash based Black-Scholes calculation of the dilutive effect of the grant of stock-based compensation during the quarter. This calculation involves numerous assumptive variables that must be estimated in order to determine the estimated expense of the grant of incentive stock options. Non-cash stock-based compensation was recorded at $47,382.

Factors in the loss for the three months ended November 30, 2011 included expenses related to the lease costs and development of operational facilities in Lisle, Illinois and Bonham, Texas as well as product development and marketing expenses for the KKS technology that have not yet seen sales results.

Other factors affecting the loss during the three months ended November 30, 2011 include accounting, audit and legal costs which totaled $21,054 that are necessary for administration of the public company. Research and development costs of $41,756 represented expenditures on recommended improvements and modifications to the industrial designs of the Company's EPRV and KKS.

The Company has staffed itself for the full scale marketing, sales and production operations in 2012 hence administrative salaries and benefits costs of $44,921, management fees of $88,569 and management consulting and investor relations fees of $59,786 were recorded at the three months ended November 30, 2011.

The gross profit margin realized from the sales of product was $47,996 (26.6%) during the three months ended November 30, 2011. The margins remain lower than anticipated targets due to low production runs and inefficiencies on start up of the assembly operations. Future gross profit margins are expected to improve as production operations become more mature and efficient as assembly runs increase in size. The Company is beginning to gain better control of its production processes and cost minimization is a key goal.

The Company's products are proving to be relevant and valuable to customers during the three months ended November 30, 2011. The Company's marketing initiatives have gained the confidence of customers and now generate new customer orders. Travel costs were higher as the Company has undertaken a full scale marketing program including trade shows to increase customer awareness of our products. Travel costs were $16,363 and direct marketing costs were $37,531 for the three months ended November 30, 2011.

In addition to its EPRV assembly facility established in January 2011 the Company is establishing its initial assembly facility for the KKS in Bonham, Texas. This facility is due to open in 2012 and will allow the Company to generate revenue from the sales of its KKS products in mid 2012. The Company will continue efforts to distribute its KKS products through the implementation of full scale commercial marketing, sales, production and distribution initiatives.

Liquidity and Capital Resources

At November 30, 2011, the Company had cash on deposit in the amount of $1,143,281; accounts receivable of $118,910; HST receivable of $38,546; prepaid expenses of $78,323 and inventory of $474,250 compared to cash on deposit of $1,457,934; accounts receivable of $337,562; HST receivable of $92,551, prepaid expenses of $45,755 and inventory of $251,171 at August 31, 2011.

The working capital position of the Company at November 30, 2011 was $1,604,372 which includes $6,292 due to related parties compared to a working capital position of $1,916,036 which includes $17,000 due to related parties at August 31, 2011. At November 30, 2011, the Company has no long-term liabilities.

Outlook

In 2012 the Company will continue to transition into a market driven, full scale production and distribution organization. Industry skepticism due to past problems has turned to eagerness to assess the value proposition that our products offer. We are now working on adoption schedules for 2012 and 2013 with OEM and Fortune 500 customers who transport hazardous commodities such as crude oil, ethanol, petrochemicals and other toxic chemicals.

Kelso has recently announced new order business in excess of $4,000,000 for delivery in 2012. Commercial revenue from our EPRV commenced in January 2011 and reached $1,311,078 by fiscal year end August 31, 2011 and added another $180,240 for the three months ended November 30 2011 verifying that our market opportunities for our products are bona fide. With commencement of OEM adoption strategies we anticipate consistent revenue growth due to the availability of our KKS and EPRV in larger quantities. Revenue opportunities will improve with new customer confidence that Kelso can deliver reliable "best available technology" solutions with proven economic and qualitative advantages over our competition.

The growth of our production capability is our primary objective. Developing supply chains and assembly operations has been a time consuming and expensive activity. In January 2011 we opened our first assembly plant to produce EPRV products. In 2012 we will commence production of our KKS products in our second assembly plant that we purchased in mid 2011 in Bonham, Texas. A third full capacity assembly plant is being designed and expected to come on stream in Bonham, Texas in mid 2012.

By mid 2012 our new KKS will broaden our product mix available to customers. The new KKS provides a revolutionary change in the handling dynamics and infrastructure of the HAZMAT industry. It is a major innovation and addresses stringent environmental sensitivities and worker safety. Our KKS program is being well supported by regulators, railroads, customers, industry workers and emergency response organizations.

Our ultimate goal is to have our EPRV and KKS become "gold standard" products on all HAZMAT applications that are produced by rail tank car manufacturers, retrofitters and repair shops. We are confident that we can build a successful multi-million dollar business on behalf of the shareholders of Kelso Technologies based on our patented technologies.

For a more complete business and financial profile of the Company, please view the Company's website at www.kelsotech.com and public documents posted on www.sedar.com.

On behalf of the Board of Directors,

James R. Bond, CEO and President

Legal Notice Regarding Forward Looking Statements: This news release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Forward-looking statements are indicated expectations or intentions. Forward-looking statements in this news release include that in 2012 the Company will continue to transition into a market driven, full scale production and distribution organization, that our facility is due to open in 2012 and will allow the Company to generate revenue from the sales of our KKS products in mid 2012, that Future gross profit margins are expected to improve as production operations become more mature and efficient as assembly runs increase, that revenue opportunities will improve with new customer confidence that Kelso can deliver reliable "best available technology" solutions with proven economic and qualitative advantages over our competition; that from the commercial sales of our EPRV and KKS products Kelso can build a successful multi-million dollar business on behalf of the shareholders of Kelso Technologies. The Company's products involve detailed proprietary and engineering knowledge and specific customer adoption criteria, hence factors that could cause actual results to be materially different include that we may be unsuccessful in raising any additional capital needs that may arise; we may not have sufficient capital to develop, produce and deliver new orders; product development may face unexpected delays; orders that are placed may be cancelled; product may not perform as well as expected; markets may not develop as quickly as anticipated or at all; or that the construction or other plans for plants run into permit, labor or other problems. Further, we are reliant on certain key employees who may leave the Company and we may be unable to protect or defend our intellectual property. Investors are cautioned against placing undue reliance on forward-looking statements. We assume no responsibility to update these forward looking statements except to the extent required by law.