H2O Innovation : H2O Innovation reports fiscal year 2013 second quarter results - Revenues increase 33.5%, Company records net

   H2O Innovation : H2O Innovation reports fiscal year 2013 second quarter
       results - Revenues increase 33.5%, Company records net earnings

Results for the three-month period ended December 31, 2012

  *Revenues of  $9.4 million,  up by  33.5% from  $7.1 million  for the  same 
    period in fiscal year 2012.

  *Gross profit up at 26.1%, compared to 22.6% for the same period in  fiscal 
    year 2012.

  *Adjusted EBITDA^[1]  at  $561,888, compared  to  ($404,906) for  the  same 
    period in fiscal year 2012. 
  *Operating, selling and administrative expenses down by $157,000, at  20.1% 
    of revenues, compared to 29.1% for the same period in fiscal year 2012.

  *Net earnings of $488,854,  up compared to a  net loss of ($1,214,510)  for 
    the same period in fiscal year 2012.

  *Operating  activities  generated  $1,024,161  in  net  cash,  compared  to 
    ($1,408,003) used for the same period in fiscal year 2012.

Results for the six-month period ended December 31, 2012

  *Revenues of $19.4  million, up by  37.3% from $14.1  million for the  same 
    six-month period in fiscal year 2012.

  *Gross profit up at 25.4%, compared to 23.6% for the same six-month  period 
    in fiscal year 2012.

  *Adjusted  EBITDA  at  $1,288,581,  compared  to  ($72,098)  for  the  same 
    six-month period in fiscal year 2012. 

  *Operating, selling and administrative expenses down by $140,000, at  19.3% 
    of revenues, compared  to 27.5% for  the same six-month  period in  fiscal 
    year 2012.

  *Net earnings of $758,550,  up compared to a  net loss of ($1,302,726)  for 
    the same six-month period in fiscal year 2012.

  *Operating  activities  generated  $2,234,375  in  net  cash,  compared  to 
    ($325,470) used for the same six-month period in fiscal year 2012.

All amounts in Canadian dollars unless otherwise stated.

Quebec  City,  February  13,  2013-  (TSXV:  HEO)  -  H[2]OInnovation   Inc. 
("H[2]OInnovation" or the  "Company") announces  its results  for the  second 
quarter of fiscal year 2013 ended  on December 31, 2012. During this  quarter, 
the Company's revenues increased  by 33.5% to  $9.4 M, up from  $7.1 M in  the 
comparable quarter of  the previous  fiscal year  - generating  a solid  gross 
profit of 26.1% compared to 22.1% in  the second quarter of fiscal year  2012. 
"This is a significant improvement from the gross profit generated in the last
two quarters. This performance is partly attributable to various factors  such 
as the rise  in our  business volume  and the  changes we  have initiated  and 
implemented since June 30, 2012 meant  to enhance our operations and  increase 
our gross profit. Many  challenges remain as we  continue to seek  operational 
excellence in project execution", stated  Frédéric Dugré, President and  Chief 
Executive Officer of H[2]OInnovation.

The Company's revenues for the second quarter of fiscal year 2013 totaled $9.4
M, representing a $2.3 M or 33.5% increase, as compared with revenues of  $7.1 
M for  the  same  quarter  of  fiscal  year  2012.  The  increase  is  largely 
attributable to revenues from  water treatment projects  which reached $6.0  M 
compared to $4.0 M  in the corresponding period  of the previous fiscal  year, 
representing a 47.7% increase. Nearly half of these $6.0M revenues come  from 
the oil & gas sector  in Western Canada and 25%  from the municipal sector  in 
the United States. This is a direct consequence of the materialisation of  the 
Company's order  backlog which  stood  at $18.7M  as  at December  31,  2012. 
Revenues from sales of specialty chemicals and consumables increased by $0.4 M
for this  quarter, reaching  $3.4 M  compared with  $3.0 M  in the  comparable 
quarter in fiscal year 2012, showing a steady growth.

The Company generated net earnings of $488,854 or $0.008 per share compared to
a net loss of ($1,214,510) or ($0.020 per share) for the same period in fiscal
year 2012. This improvement is attributable  to four main factors. First,  the 
Company recorded a high  level of revenues. Second,  management has applied  a 
tight control  on project  execution, notably  for procurement,  and on  hours 
spent on projects. Third, management closely monitors the SG&A and is diligent
in finding  additional  savings.  Finally,  the Company  recorded  a  gain  on 
settlement agreement related to the Company's wastewater activities. "Over the
last two quarters we have made an important restructuration in our  wastewater 
activities, both on the technical and  commercial sides. We believe this  will 
springboard the growth  momentum in this  sector as we  are consolidating  our 
sales rep network", added Frédéric Dugré.

CONSOLIDATED RESULTS                 Three-month period       Six-month period
Selected financial data           ended on December 31,  ended on December 31,
                                            (Unaudited)            (Unaudited)
                                       2012        2011       2012        2011
                                          $           $          $           $
Revenues                          9,418,908   7,056,495 19,401,802  14,126,263
Gross profit                      2,461,061   1,592,624  4,923,632   3,337,558
Gross profit                          26.1%       22.6%      25.4%       23.6%
Operating expenses                  139,369     181,538    275,141     286,644
Selling expenses                    904,630     954,006  1,747,784   1,818,673
Administrative expenses             853,853     919,647  1,717,116   1,774,739
Net earnings (loss)                 488,854 (1,214,510)    758,550 (1,302,726)
Basic and diluted earnings (loss)
per share                             0.008     (0.020)      0.013     (0.022)
Adjusted EBITDA                     561,888   (404,906)  1,288,581    (72,098)

[1]The definition of adjusted earnings before interest, tax depreciation  and 
amortization (adjusted  EBITDA)  does  not take  into  account  the  Company's 
changes in fair value of  contingent considerations, impairment of  intangible 
assets, impairment  of  goodwill,  stock-based  compensation  costs,  gain  on 
settlement agreement, and  share of (earnings)  loss in a  joint venture.  The 
definition of adjusted EBITDA used by  the Company may differ from those  used 
by other companies.

During the  quarter,  the Company  added  $4.3 M  in  new bookings  for  water 
treatment projects. These  new bookings,  coupled with the  level of  revenues 
realized from  systems projects  during  the quarter,  have brought  down  the 
backlog at $18.7 M  as at December 31,  2012. Management remains confident  to 
grow the  Company's sales  backlog again  above the  $20M mark  as its  sales 
pipeline is rich with multiple opportunities  in its targeted markets. In  the 
coming months, the  Company will focus  on increasing its  footprint in  North 
America for water and wastewater treatment projects.

The Company's ratio of selling, operating and administrative expenses ("SG&A")
as a whole over revenues amounted to  20.1% for this quarter, down from  29.1% 
for the corresponding quarter  of the previous fiscal  year. This decrease  is 
partially attributable to the increase in volume of business and reflects  the 
Company's efforts to reach profitability and maximize the use of its  internal 
resources, showing the benefit and scalability of its business model. Overall,
the Company's SG&A expenses show a decrease of approximately $160,000 compared
to the corresponding quarter of fiscal year  2012 and remain in line with  the 
Company's fiscal year 2013 budget.

Adjusted EBITDA  for  the quarter  was  recorded at  $561,888,  compared  with 
($404,906) for the same  period ended December 31,  2011. The higher  revenues 
recorded during the  quarter compared  with the corresponding  quarter of  the 
previous fiscal year, combined with  the significant gross profit  improvement 
from 22.6% to 26.1% and the somewhat stable SG&A expenses also contributed  to 
generating positive adjusted EBITDA.

Operating activities  generated  $1,024,161  in  cash  for  the  period  ended 
December 31,  2012,  compared  with  ($1,408,003)  of  cash  used  during  the 
corresponding period ended December 31, 2011. The rise is mainly  attributable 
to the significant improvement in net earnings in the second quarter of fiscal
year 2013 as compared  with the corresponding period  ended December 31,  2011 
and to the positive change in working capital items.

Over the  six-month period  ended December  31, 2012,  the Company's  revenues 
totaled $19.4M,  compared  to  $14.1M for  the  corresponding  period  ended 
December 31, 2011, showing an increase  of 37.3%. During this same period  the 
Company recorded net earnings  amounting to $758,550  and a positive  adjusted 
EBITDA of $1,288,581, compared  to a net loss  of ($1,302,726) and a  negative 
adjusted EBITDA of ($72,098) for the corresponding period of fiscal year 2012.
For the  six-month  period ended  December  31, 2012,  the  Company  generated 
$2,234,375 of cash flows from its operating activities, compared to ($325,470)
used by its operating activities for  the corresponding period of fiscal  year 
2012.

The second quarter financial report is available on www.h2oinnovation.com  and 
on NYSE Euronext Alternext's  site. Additional information  on the Company  is 
also available on SEDAR (www.sedar.com).

Prospective disclosures
Certain statements set forth  in this press  release regarding the  operations 
and the activities of H[2]OInnovation as well as other communications by  the 
Company to  the public  that describe  more generally  management  objectives, 
projections,   estimates,   expectations    or   forecasts   may    constitute 
forward-looking statements  within  the  meaning  of  securities  legislation. 
Forward-looking statements  concern analysis  and other  information based  on 
forecast future  results  and the  estimate  of  amounts that  cannot  yet  be 
determined. Forward-looking  statements  include  the use  of  words  such  as 
"anticipate", "if",  "believe",  "continue",  "could",  "estimate",  "expect", 
"intend",  "may",  "plan",  "potential",  "predict",  "project",  "should"  or 
"will", and other similar  expressions, as well as  those usually used in  the 
future and the conditional,  notably regarding certain  assumptions as to  the 
success of a  venture. Those  forward-looking statements involve  a number  of 
risks and uncertainties, which may result in actual and future results of  the 
Company to be materially different than those indicated. Information about the
risk factors  to  which the  Company  is exposed  is  provided in  the  Annual 
Information Form dated September25, 2012 available on SEDAR  (www.sedar.com). 
Unless required  to  do  so pursuant  to  applicable  securities  legislation, 
H[2]OInnovation assumes  no obligation  to update  or revise  forward-looking 
statements contained in  this press release  or in other  communications as  a 
result of new information, future events and other changes.

About H[2]OInnovation
H[2]O Innovation  designs  and provides  state-of-the-art,  custom-built,  and 
integrated water treatment solutions  based on membrane filtration  technology 
to municipal,  energy &  natural resources  end-users. H[2]O  Innovation  also 
provides a complete line of  specialty chemicals and consumables for  membrane 
filtration and reverse osmosis systems. For more, visit www.h2oinnovation.com.

Neither TSX Venture  Exchange nor  its Regulation Services  Provider (as  that 
term is defined in the policies of the TSX Venture Exchange) nor the Alternext
Exchange accepts responsibility for the adequacy or accuracy of this release.

                                    - 30 -
                                   Source:
                           H[2]O Innovation Inc. 
                            www.h2oinnovation.com

Contact:
Marc Blanchet
+1418-688-0170
marc.blanchet@h2oinnovation.com

HEO_press_rel_Q2_2013_Results_Feb_13_2013_ENG

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