KLS Kelso Technologies Inc.

Kelso Technologies Inc. (the "Company" or "Kelso") (TSX
VENTURE:KLS)(OTCQX:KEOSF)(PINKSHEETS:KEOSF) - 


Kelso reports that it has released its audited financial statements for the year
ended August 31, 2011.


Kelso is an emerging railroad equipment supplier that produces and distributes
new innovative technologies for the safe containment of hazardous materials
("HAZMAT") during transport. Our technology objectives are to improve the safety
of industry workers and the environment while providing substantial returns on
investment for our customers and shareholders worldwide.


Proprietary products include the Company's unique external constant force spring
pressure relief valves ("EPRV") and a revolutionary new entry manway securement
system trademarked the "Kelso Klincher(TM)" ("KKS"). All products are patented
designs that reduce the risk of environmental harm due to non-accidental release
events in the transport of HAZMAT.


Results of Operations

The financial results for the year ended August 31, 2011 are indicative of a
product development company emerging with a new proprietary products-for-sale
business plan. The strategic plan for commercialization requires considerable
investment in human resources, production infrastructure and pre-sales marketing
programs.


The Company commenced distribution of its EPRV products that were assembled at
new leased facilities in Bonham, Texas in the first week of January 2011. New
customer orders and revenue from deliveries of the EPRV began to grow during
fiscal 2011 and is reflected in the revenue reported for the year ended August
31, 2011.


The loss for the year ended August 31, 2011 was $1,478,056 against revenue of
$1,311,078 compared to a loss of $307,915 against revenue of $190,844 for the
year ended August 31, 2010. In 2010 the reported loss was significantly improved
by the forgiveness and restructuring of a large portion of debt by related
parties and shareholders totaling $438,510.


A considerable percentage (41%) of the loss for the year ended August 31, 2011
was attributable to the measure of the non-cash based calculation of the
dilutive effect of the grant of stock-based compensation during the year. 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 $604,165 in
accordance with GAAP.


Factors in the loss for the year ended August 31, 2011 included the expenses
related to the establishment of operational facilities in Lisle, Illinois and
Bonham, Texas as well as development and marketing expenses for the KKS
technology that will not see sales results until early 2012. Non recurring costs
also include expenditures made in the area of nano-composite coatings research
prior to the suspension of this project in March 2011.


Other factors affecting the loss during the year ended August 31, 2011 include
accounting, audit and legal costs which totaled $141,849 due to higher audit
costs and financing activities. Research and development costs of $109,672
represented expenditures on the Company's EPRV, KKS and coatings laboratory in
Lisle (Chicago), Illinois.


The Company is staffing for the full scale marketing, sales and production
operations in 2012 hence higher administrative salaries and benefits costs of
$215,439, executive management fees of $255,283 and management consulting and
investor relations fees of $146,275 were recorded at the year ended August 31,
2011.


The gross profit margin realized from the sales of product was $316,356 (24%)
during the year ended August 31, 2011. The margins were lower than anticipated
targets due to low production runs and inefficiencies on start up of the
assembly operations in January 2011. 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.


Liquidity and Capital Resources

At August 31, 2011, the Company had cash on deposit in the amount of $1,427,947;
accounts receivable in the amount of $330,619; HST receivable of $90,647,
prepaid expenses of $44,814 and inventory of $246,005 compared to cash on
deposit of $284,207; accounts receivable of $142,834 and HST receivable of
$28,933 and prepaid expenses of $17,690 at August 31, 2010.


The working capital position of the Company at August 31, 2011 was $1,876,628
which includes $16,650 due to related parties compared to a working capital
position of $91,950 which included $111,344 due to related parties and a $75,000
note payable at August 31, 2010.


Outlook

Since April 2010 Kelso has reorganized its corporate affairs, secured new equity
capital, developed production infrastructure and executed marketing initiatives
with the goal of gaining market share for its products and repairing its
credibility as a reliable railroad equipment supplier. Kelso has an experienced
executive management team focused on the business relationships required to
execute our commercial business plans for the multi-million dollar sales of our
EPRV and new KKS products.


In 2012 the Company will continue to transition into a market driven, full scale
sales, production and distribution organization. Industry skepticism due to past
corporate 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 Fortune 500 customers who transport hazardous commodities such as crude
oil, ethanol, petrochemicals and other toxic chemicals.


Growing our production capability continues to be 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 early 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.


We anticipate consistent revenue growth due to the availability of our new KKS
in 2012 and continued sales of our EPRV. New customer confidence that Kelso can
deliver reliable "best available technology" solutions with proven economic and
qualitative advantages over our competition is expected to fuel growth in future
periods.


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 main challenge to market penetration and business growth is that the
railroad industry has been very slow to design or adopt new technologies.
Budgets and testing requirements are time consuming, and contrary to profit
goals. In many cases designs have not changed in decades even though
environmental sensitivities and engineering problems haunt and perplex the
industry. This circumstance provides Kelso with a strong and unique business
platform from which to create, develop and distribute innovative products that
provide solutions for our customers in terms of improved performance, cost
benefits and longevity.


Management believes that with the economic recovery of the railroad industry in
North America combined with the more stringent enforcement of United States and
Canadian environmental regulations for shippers of chemical commodities and the
adverse effects of wear and tear on existing railroad tank cars the railroad
industry will rebound significantly.


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 focused on building a successful
multi-million business on behalf of the shareholders of Kelso Technologies.


For a more complete business and financial profile of the Company, management
encourages interested parties to 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 sales,
production and distribution organization; that a third full capacity assembly
plant is expected to come on stream in Bonham, Texas in mid 2012; we anticipate
consistent revenue growth; that there will be more stringent enforcement of
United States and Canadian environmental regulations for shippers of chemical
commodities; and that Kelso can build a successful multi-million 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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