HAL.L Regulatory News (HAL)

This press release contains certain forward-looking statements with respect to the operations, performance and financial condition of the Company. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this press release and the Company undertakes no obligation to update these forward-looking statements. Nothing in this press release should be construed as a profit forecast.

HaloSource GROUP OPERATIONAL UPDATE

Seattle, U.S.A. - HaloSource, Inc. ("HaloSource" or "the Company") (HAL.LN, HALO.LN), the clean water and antimicrobial technology company, today announces it has made strategic progress in the first half of 2011 while generating six-month revenue of $5.4m. Solid progress has been made in product development, partner relationships, regulatory clearances and operational capacity. Whilst the Company continues to execute against its stated strategy, with six new partnerships signed in the first-half of 2011, a combination of manufacturing issues for its new finished device and partner rollout delays, compounded by the impact of poor weather on existing product lines, have delayed the rate of expected growth. As a result, first half revenue fell by 9% versus the first half of 2010.

In water purification, launch delays for the Company's new finished device driven by a combination of tooling adjustments, manufacturing and assembly complexity and partner readiness delayed the rollout of the new HaloPure line of drinking water purification finished devices. The Company has now solved these challenges and Bajaj, India's largest appliance company with more than 300,000 distribution locations, has now launched the HaloPure Waterbird (as the Bajaj XTP21DX.) In June, shipments to Bajaj totaled 3,500 and the Company expects demand to continue to ramp-up in the second half of 2011.

In the water clarification business, unusually poor weather in the US had an adverse effect on the early buying season in the North American pool industry, reducing demand for SeaKlear products during 1H. However, weather in the US has improved in recent weeks and the Company expects the demand to increase as the summer progresses.

As the result of these impacts, the pace of revenue growth has been slower than expected leading to revised expectations for 2011 revenue to be in the $18-$22m range. The Directors believe that while it is taking longer than expected in the short-term, the growth opportunities for the HaloPure line of water purification devices in the medium to long-term remain significant. They expect the ramp-up to continue through the remainder of 2011 and beyond. With $20.5m of cash resources at the close of 1H 2011, the Company has adequate capital to execute against its growth plans.

HaloSource will announce its half-year results the week of 12 September 2011. In advance of these results the Company is providing an update on trading since 31st December, 2010.

Summary of first half-year progress

·; China MOH (Ministry of Health) certification of HaloPure received

·; NSF International certification of HaloPure under Standard 42 achieved

·; Development of the HaloPure Waterbird line of gravity purifiers complete

·; Shipment of Bajaj branded HaloPure powered devices in India began in June with 3,500 units shipped to support formal launch

·; Continued shipments to a major brand-name device manufacturer to support China roll-out, additional partner agreements in process

·; Strong growth in OEM recreational water category, up 34% over 2010 inclusive of Aquapill acquisition

·; Facility expansions in India and China nearing completion to support anticipated growth through 2013, increasing HaloPure cartridge manufacturing capacity by an additional 50%

·; Brazilian corporate entity formation completed and country manager appointed - expecting at least two customer launches with HaloPure in the second half of 2011

·; Agreement reached with an additional major US pool products retailer with 600 outlets

·; HaloSource highlighted in Lux Research Water Chemicals and Competitors: The Long, Long March of the 'Chemical-Free' Revolution, as "deepest in the dominant quadrant"

·; Cash Balances totaling $20.5m at 30 June 2011

HaloPure Drinking Water

Recognition and adoption of HaloSource's US Environmental Protection Agency ("EPA") registered HaloPure drinking water disinfection technology continues to expand. In May, China's Ministry of Health formally approved HaloPure disinfection technology as the first new drinking water technology approved under revised approval and certification standards adopted in China. This will allow the full scale supply of HaloPure components to China-based device and appliance manufacturers and multi-nationals that sell consumer drinking water devices to China's rapidly expanding middleclass. Added to this, the Company began shipping commercial scale orders to a multi-national drinking water device manufacturer who recently launched in China, opened a Shanghai City office to support business development efforts and moved ahead with expansion of the Shanghai manufacturing facility.

June saw the certification of HaloPure by NSF International under its stringent Standard 42 method for drinking water. These certifications streamline the pathway to adoption of the technology as a broadly approved means of disinfection and provide assurance that products powered by HaloPure will meet the most stringent regulatory and registration requirements as they are brought to market. The Company also signed its first supply agreement for finished devices incorporating HaloPure with Bajaj in India and began first shipments in June. Regular sales of HaloPure cartridges to existing Indian partners, Eureka Forbes and Bajaj are starting to ramp up and progress continues to be made on a series of pending distribution agreements and product development initiatives with multi-national and regional companies for whom India is a focus market. Added to India, HaloPure cartridges or components have been sold in preliminary quantities in China, Brazil, Israel, Croatia, Turkey, the United States and Thailand, with larger volume sales expected to ramp up in the US, China and Brazil during the second half of 2011 as product supply and distribution agreements are finalized and local product regulatory hurdles are cleared. The Company also formed a Brazilian corporate entity in May and appointed a country manager for that market. We expect to have two shipping customers in Brazil by year-end 2011.

HaloSource now offers a range of standard HaloPure components, a disinfecting HaloPure-powered pitcher product for in-home consumer use, and the recently completed HaloPure Waterbird, a gravity HaloPure-powered canister purifier for use in households in emerging markets. Available in three models, the HaloPure Waterbird can treat water for a family of five for up to six months. Commercial agreements for the distribution of these products are pending in Brazil, US, Canada and the NGO markets.

Water Clarification

HaloSource continues to build a well recognized and respected stable of brands in the Recreational Water business, focused on the specialty product market for pools and spas supported by a full line of cleaning and clarifying products under the SeaKlear, AquaPill and PoolMark brands. The acquisition of the AquaPill product line in 2010 has provided an additional product delivery mechanism and has driven additional interest in both domestic and international markets. Strong growth of the bulk/OEM sector continues with sales up 34% over first half 2010 revenues driven by expanded distribution agreements amongst key accounts in the US, Canada and Japan. An additional distribution agreement was signed with the largest independent US pool products retailer with 600 retail stores.

Development of the Environmental Water sector has been challenging, and the Company is yet to gain significant traction in its expansion beyond core storm-water remediation products primarily due to the depressed price of natural gas. New hires and field validation work have occupied the team's focus for the first half of 2011. With the recent appointment of a business leader with deep domain expertise, the Company continues to believe its proprietary rapid-acting, dual bio-polymer technology will drive significant growth by providing effective alternative solutions in the oil and gas, mining and bio-fuels industries.

Antimicrobial Coatings

Beyond water technology, the Company expects that continued regulatory efforts with the US EPA will ultimately result in its HaloShield-powered textile products (marketed in the US under the Clorox Freshcare™ brand) becoming the first and only textile products to carry pathogenic-killing claims.

Liquidity and Capital Resources

The Group had cash balances at 30 June 2011 of approximately $20.5 million and no debt. This funding ensures HaloSource is well positioned to build on the progress it has made in the first half of 2011 and undertake the extensive growth activities planned across its businesses for the remainder of 2011 and beyond.

ENDS

About HaloSource

HaloSource is a clean water technology company, headquartered in Seattle, US with operations in India and China. It is focused on the provision of cleaner, clearer and safer water using its proprietary N-halamine bead technology to clean and purify water, killing bacteria and viruses that may cause disease.

HaloPure provides safer drinking water. In 2009, it became the first new drinking water technology in 30 years to be granted both Manufacture-For-Use and Device registrations by the United States Environmental Protection Agency (USEPA), which is widely recognized as having the world's most stringent performance requirements for water purification. HaloPure® is a unique contact biocide technology that is proven to attack and kill a wide range of harmful micro-organisms and is approved for long-term use in a variety of markets, including the United States.

SeaKlear and StormKlear products use a second technology based on natural bio-polymers to provide water clarification and antimicrobial applications for treating recreational and environmental water; and HaloShield facilitates the binding of chlorine-based bleach to textiles such as sheets, lab coats and towels. www.halosource.com

About HaloPure's Markets

HaloPure products are principally targeted at consumers in emerging market countries, where access to safe drinking water is particularly poor. In an independent analysis of the global Point of Use drinking water device market carried out in 2005, Frost and Sullivan concluded that:

·; the market for residential water treatment equipment in China was estimated at $960 million in 2005, growing at an annual rate of 20.4 per cent between 2004 and 2011;

·; the market for residential drinking water devices in India was estimated at $425 million in 2009, and experiencing growth of approximately 25 per cent annually; and

·; in 2005 the global markets for filtration formats in the form of under-the-sink, counter top and replacement cartridges were growing annually at 20 per cent, 21 per cent and 18 per cent, respectively.

The World Health Organisation has estimated that 1.1 billion people lack access to safe drinking water and the Centre for Disease Control is recommending Point Of Use filtration and disinfection.