QUEBEC CITY, QUEBEC (ALTERNEXT:MNEMO:ALHEO) ("H2O") announces the results of the second quarter 2007-2008. During this period, the Company made significant progress in terms of market penetration in the United States, improvement in gross profit margin and expansion in markets with strong potential.

Strong progression for the first six-month period

Revenues for the second quarter reached CAD 1,876,157. The decrease in sales in comparison to the last quarter and to the corresponding quarter in 2006 is mainly attributable to features of some contracts whose advancement will be more reflected during in subsequent quarters. Expenses have already been incurred for some important contracts and the associated incomes will only be recognized during the third and forth quarters. For the first six months of the 2007-2008 financial years, sales nevertheless increased markedly. They reached CAD 4,332,377 for the period ending December 31, 2007. Revenues from the United States increased to more than 70 % of the total, and opportunities in the business development plan point to an even larger portion from this market in the second half of the year. In addition, the efforts of the Company to improve the gross profit margin are beginning to have an effect. For the second quarter, the gross profit margin has risen to 22.7 %, compared to 22.2 % for the same period last year.

Well oriented order book

With an impressive list of completed municipal projects in North America behind it, the Company continues its expansion into this market and plans to increase its marketing efforts. As a result, new municipal contracts were added to the order book during the second quarter. The majority of them are in the United States, a buoyant market for membrane filtration technology. On December 6, 2007, H2O announced the signing of three contracts whose total value is CAD 5.4 M. It is worth mentioning that orders on December 31, 2007 amounted to CAD 12 M.

Wider territorial coverage

In order to increase its presence in growth sectors in Canada, H2O acquired the company Sigma Environmental Solutions Inc. (www.sigmaenv.com) last November and appointed its principal directors. This presence in Alberta will allow H2O to reinforce its offering in the petroleum and mining industry and thus respond to high demand in this segment of the market. On the international front, the company is continuing its marketing approach in buoyant markets that have immense needs for seawater desalination.

Quarterly financial data

CONSOLIDATED RESULTS (Unaudited)


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                           Three-month period            Six-month period
                           ending December 31          ending December 31
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                          2007           2006          2007          2006
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                           CAD            CAD           CAD           CAD
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Sales                1,876,157      2,406,298     4,332,377     3,127,943
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Gross profit           426,660        534,602       923,673       797,257
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Net loss for the
 period and
 comprehensive
 results              (748,867)      (683,810)   (1,726,675)     (950,317)
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Basic and diluted
 net loss per share     (0.021)        (0.029)       (0.049)       (0.041)
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Cash flows from
 operating activities (369,512)    (1,445,142)     (177,490)   (2,055,888)
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Additional information on the Company is available on SEDAR at www.sedar.com and on H2O web site : www.h2oinnovation.com

About H2O

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

Prospective disclosures

This press release may contain prospective disclosures representing current expectations of H2O and are subject to certain risks and uncertainties. H2O 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.

Contacts: Guy Goulet Chaiman of the Board and CEO 450-227-1150 ggoulet@h2oinnovation.com Frederic Dugre President and COO 418-688-0170 fdugre@h2oinnovation.com

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