KLS Kelso Technologies Inc.

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(TM)
("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.

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