Covalon Releases 2008 Q3 Results

August 22, 2008

Mississauga, Ontario – August 22, 2008, Covalon Technologies Ltd. (“Covalon” or the “Company) (TSX VENTURE: COV) is pleased to release its unaudited financial results for the third quarter ended June 30, 2008, which were prepared by management.

Third Quarter 2008 Highlights:

·          Total revenues increased by 32% or $157,065 over the third quarter of 2007 to $337,262;

·          Gross profit as a percentage of sales was 50% in the third quarter of 2008, an 18% improvement compared to the same period last year;

·          Executed a $100,000 contract with a partner to develop antimicrobial coatings on Percutaneous Urinary Catheters;

·          Expenses of $436,328 for Covalon’s innovative EPAS1 Research and development project are capitalized; 

·          Regulatory investments increased by $99,749 or 71% over the third quarter of 2007 to $240,242;

·          Net loss decreased by 33% over the third quarter of 2007 to $498,949;

·          Loss per share of $0.01 was the same as the third quarter of 2007.

Dr. Frank DiCosmo, President and Chief Executive Officer stated, “Covalon continues to make strong investments in resources in the regulatory, research and product development pipeline.  Covalon’s marketing activities are a major focus and we are looking forward to realizing the results of our investments.  Our major distribution partner, Smith & Nephew, receives top-level support and continues to provide very positive feedback on the clinical behaviour and acceptance of our collagen-based dressings. We have identified innovative new antimicrobial coatings which offer to reduce blood stream, catheter-related hospital-acquired infections as well as the ability to reduce the incidence of blood clot formation. Our talented teams continue to make great strides in new collagen-based products as well for the surgical, dental and ocular markets. The Company reached a critical milestone in its EPAS1 genetically-based tissue regeneration research program related to isolating, growing genetically modified stem cells that can be used for use in myocardial preservation by cell transplantation needed for treating ischemic conditions, tissue/organ degeneration and wound healing. ”

Mr. William Jackson, Chief Business Officer, noted “In order to continue to support the growing product opportunities at Covalon, we are increasing our marketing infrastructure in order to leverage our innovative technology platforms in collagen-based dressings and coatings.  There are many exciting new product opportunities at our doorstep.”

The Company’s consolidated financial statements and MD&A for the three and nine month periods ended June 30, 2008 are available on SEDAR at www.sedar.com and on the Company’s website at www.covalon.com.

About Covalon Technologies Ltd.

Covalon Technologies Ltd. is a developer of advanced medical products which has patented therapeutic biomaterials for wound care and surgical applications, and coatings for medical devices. Polymer chemistry and surface coating technology have been combined to create a range of time-release drug delivery platforms that can be applied to many medical devices.  A variety of applications for this technology have been identified and specific products have been developed. These products feature solutions to many of the problems caused by the material properties of the medical devices currently offered by most manufacturers and suppliers.

Additional information can be found at www.covalon.com

For further information please contact:          

Dr. Frank DiCosmo, Ph.D.
President  & CEO
T: (905) 568-8400

 or

 Francis K. Lindayen, C.A.
CFO
T: (905) 568-8400

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.  The TSX Venture Exchange has neither approved nor disapproved of the contents of this release.

This document contains forward-looking statements. These statements relate to future events or future performance. In some cases, forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” or the negative of any of these terms or comparable terminology. Such statements reflect the current views of management of the Company with respect to future events. Actual events or results may differ materially. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.