H2O Innovation Announces its Third Quarter Results 2007-2008

Management of H2O Innovation ("H2O") today announced the third-quarter results for 2007-2008.(TSX VENTURE: HEO) During this period, the Group recorded strong sales growth, particularly in the promising U.S. market, and a gross margin over 20% for the third consecutive quarter.

CONSOLIDATED RESULTS
(Unaudited)


                                Three-month period       Nine-month period
                                   ending March 31         ending March 31
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                                   2007       2006        2007        2006
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                                    CAD        CAD         CAD         CAD
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Sales                         2,807,212  2,018,674   7,139,589   5,146,617
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Gross margin                    625,131    676,960   1,548,804   1,474,217
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Net loss for the period and
 comprehensive results         (454,959)  (204,176) (2,181,634) (1,154,493)
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Basic and diluted net loss
 per share                       (0.012)    (0.008)     (0.060)     (0.049)
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Note: The "extended results" item corresponds to the variation of
      shareholders' equity from operations and other events and
      circumstances unrelated to the shareholders. These operations
      and events include the unrealized gains and losses following
      fluctuations in the fair value of investments available at
      the time of sale and the conversion of autonomous foreign
      subsidiaries.

Strong sales growth: +39%

The name recognition of the H2O Innovation Group, the recognition of its know-how in the treatment of drinking water, wastewater and industrial process water, and the territorial development strategy conducted by the Group within North America are beginning to show results. Sales are up 39% in the 3rd quarter ended on March 31, 2008 and 38% over the first nine months of the year, compared to the same periods in 2007.

70% of these sales come from US contracts, a trend which should accentuate in the quarters ahead. This performance validates the development strategy adopted by H2O in the United States, where the demand is exponential.

A gross margin exceeding 20% for the 3rd consecutive quarter

The major cost control efforts initiated since the beginning of 2007-2008 allowed the Group to generate a 22% gross margin in the 3rd quarter and over the first nine months of the current year.

The gross margin has been maintained at over 20% since the 1st quarter of 2007-2008, particularly due to the better purchasing conditions obtained by H2O from its suppliers.

The increase in the net loss over the quarter ended March 31 is essentially due to operating, selling and administration expenses and overhead, and the non-cash expenditure of CAN$151.116 after the award of stock options to the Company's directors and key employees and higher depreciation and amortization.

RECENT EVENTS

An enriched wastewater treatment technology portfolio

Last April the Group acquired Wastewater Technology Inc. (WTI), an American company which owns patented wastewater treatment technologies, including a membrane bioreactor ("MBR") technology that meets increasingly strict environmental standards.

On the strength of its multiple achievements (over 70 wastewater treatment systems installed throughout the United States, Eastern Europe and China) and its experience and know-how, WTI gives H2O access to new business opportunities for wastewater treatment in high-growth sectors. Over the past two years, WTI realized average sales over CAN$2.6 million.

A beefed-up geographic presence in the promising U.S. market

WTI is the second acquisition, with MSI, realized by the Group in the United States, a particularly promising market for municipal and industrial contracts. This acquisition also allowed H2O to develop its sales force, already well established in California and Florida, by the addition of WTI's network of 15 manufacturer's agents and representatives located throughout the United States.

A backlog of CAN$17.4 million - (May 14th, 2008)

On the strength of more extensive geographic coverage and an impressive list of achievements for North American municipalities, new municipal and industrial contracts were added to the backlog during the 3rd quarter. Most of them will be carried out in the United States, a promising market for membrane filtration technologies.

Seven new contracts with a total value of CAN$5.6 million were obtained in March and April 2008, validating the relevance of the offer developed by H2O.

These contracts concern :