HAL.L Regulatory News (HAL)

FOR IMMEDIATE RELEASE

13th March 2012

This press release contains certain forward-looking statements. All statements contained in this press release that do not relate to matters of historical facts should be considered forward-looking statements. Forward-looking statements include statements with respect to the operations, performance and financial condition of the Company, the market for and benefits of its products and services, Company's introduction and deployment of new products, the potential benefits of business relationships with third parties, and the Company's plans and strategies for future growth. 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. These statements about future events are subject to risks and uncertainties that could cause HaloSource's actual results to differ materially from those that might be inferred from the forward-looking statements. HaloSource can make no assurance that any forward-looking statements will prove correct.

HaloSOURCE, INC.

("Halosource" or "the Company")

Preliminary results announcement

Seattle, U.S.A. - HaloSource, Inc. (HAL.LN, HALO.LN) the clean water and antimicrobial technology company traded on London's AIM, today announces its preliminary results for the year ended 31 December 2011.

2011 Highlights

·; Group revenue was $12.0 million;

- Water Clarification revenue was $10.0 million

- Water Purification revenue was $1.4 million

- Antimicrobial Coatings revenue was $0.6 million

·; Martin Coles, appointed in October 2011 as President and CEO, bringing 34 years of expertise in consumer marketing, sales and operations both internationally and domestically at world recognized brands including Procter & Gamble, PepsiCo, Nike, Reebok and most recently as COO and then President of Starbucks Coffee International.

·; China Ministry of Health ("MOH") approval received for the HaloPure® drinking water technology as well as approval of a HaloPure® powered pitcher cartridge, both of which are critical and major milestones for the Company which will continue to differentiate and elevate the unique technology and contributions to safe drinking water.

·; Achieved NSF International certification of HaloPure® under Standard 42 assessment protocol for component material safety under its NSF/ANSI Standard 42. This listing provides a pathway for the seamless integration of HaloPure® technology into products without compromising prior NSF device certifications and also paves the way for HaloPure powered finished devices to move through the NSF device certification process.

·; First order of pitchers shipped to a major U.S. OEM for retail distribution.

·; Product shipments commenced, into the rapidly expanding Indian markets, of a free standing, gravity fed unit in partnership with Bajaj Electricals, the leading small appliance manufacturer and distributor in India.

·; Began shipping new Water Purification cartridges and pitchers to new partners in both Malaysia and Indonesia.

·; Signed an agreement for Water Purification devices including a free standing gravity fed unit, an Under the Counter ("UTC") application and pitchers for retail distribution in Africa, the Middle East and Russia with Water Applications Limited.

·; A supply agreement for HaloPure® drinking water disinfection cartridges signed with Fairey Industrial Ceramics Limited ("FICL"), the UK based sole manufacturer of the world-famous range of Doulton®, British Berkefeld® and Fairey® ceramic drinking water filters.

·; Signed a joint development agreement with AWG International for a second generation, air-to-water generator cartridge.

·; Shipped the first order for free standing gravity fed units under a trial targeting the non-governmental organization ("NGO") category via our British partner, Del Agua.

·; Completed facility expansions in India and China increasing HaloPure® cartridge manufacturing capacity by an additional 50%.

·; Completed our corporate entity formation in Brazil and have been working on HaloPure® product launches with two different distributors.

·; Reached an agreement with a major U.S. pool products retailer with over 600 outlets.

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

 Post balance sheet events:

·; Signed a joint development agreement with a second major multi-national company ("MNC") to launch a low-cost Water Purification device powered by HaloPure® for emerging markets.

·; Signed a joint development agreement with Servicios de Ingeniería Geosintética, S.A. ("SIGSA"), located in Costa Rica, to develop and deploy HaloSource's unique eco-friendly HaloKlear™ Dual Polymer System ("DPS") water treatment technology. SIGSA provides constructed solutions to a variety of industries for treatment of storm water and wastewater streams.

Martin Coles, President and Chief Executive of HaloSource Inc, said:

"While 2011 was a challenging year for our Company, I believe we are beginning to see the early benefits of a new strategic direction which focuses on four key areas: innovate consumer/end user driven products across all segments; develop a clear reputation in our business segments as the water experts; build strong strategic relationships with recognized business partners to drive the reach and application of our technologies; and the development of our people as key differentiators versus other players in the market."

"Our emphasis on carefully securing the right partners will pave the way for the successful deployment of our technologies. We have a robust innovation pipeline which we believe will contribute to our ability to stay ahead of our competition in highly competitive growth markets."

"Whether you drink it, play in it, or need to put it back safely into the environment, HaloSource will be a major player in the clean water industry. I am excited at the opportunities that lie ahead for us as we prove our applications this year."

Enquiries

About HaloSource

HaloSource is a global clean water technology company headquartered in Seattle, Washington U.S.A. and is focused on the provision of cleaner, clearer and safer water using its proprietary technologies across four platforms:

·; HaloKlear™ products employ natural bio-polymers to provide water clarification on an industrial scale with dramatic reductions in ecological impact

·; HaloPure® became the first drinking water technology in 30 years to be registered by the United States Environmental Protection Agency ("USEPA"). In 2010, HaloPure was approved by China's Ministry of Health ("MOH") and widely recognized as the world's most stringent performance requirements for water purification, a key differentiator for our multi-national partners

·; SeaKlear® Pool and Spa treatment products bring both natural bio-polymers and antimicrobial applications for treating recreational water

·; HaloShield® products consist of antimicrobial coatings solutions that employ unique technology that binds chlorine-based bleach to textiles such as sheets, lab coats and towels for use as a non-toxic biocide. www.halosource.com

HaloKlear, HaloPure, SeaKlear and HaloShield are either trademarks or registered trademarks of HaloSource, Inc. All other trademarks, brand names or product names belong to their respective holders.

HaloSource, Inc.

Statement by the Chairman and CEO

Overview and financials

In a very challenging environment, 2011 Group revenue fell 15% to $12.0 million, driven primarily by the impact of poor weather on the recreational water business, lower than expected U.S. construction activity in the environmental water business and delays in launching our unique water purification technology in a free standing gravity fed unit with Bajaj prior to India's all-important monsoon season.

Operating expenses totaled $18.7 million for the year and the U.S. GAAP loss for the year was $14.7 million. Our gross margin for the year was 35%, which was below expectations due to slower than anticipated realization of supply contracts in the latter part of 2011. Our net loss for the year was $14.7 million, which includes the impact of non-cash share based compensation of $0.6 million as well as severance and other related costs totaling $0.8 million related primarily to the Company's CEO transition and other cost reductions implemented during the fourth quarter of 2011. Absent these items, the Company's non-GAAP net loss would have been $13.3 million.

The Company had cash, restricted cash and short-term investment balances of $13.4 million at 31 December 2011. The Company believes cash balances on-hand as of year-end will be sufficient to execute against its strategy during 2012.

Business Review

HaloPure® Drinking Water

As previously reported, the Company's Water Purification business was significantly impacted by manufacturing challenges associated with its newly developed, free standing gravity fed unit for household water purification which launched with Bajaj in India during the first half of 2011. These issues delayed our launch and ultimately resulted in HaloSource and Bajaj missing most of the 2011 monsoon season in India, a large driver of seasonal demand for water purification devices. The Company has worked closely with Bajaj, a key distribution partner in India, to implement several product enhancements together with redesigned packaging and key design improvements.

On the regulatory front, we received China MOH clearance in mid-2011. This has enabled the Company to accelerate its partnering activity on a number of fronts in China.

Water Clarification

The Company's Water Clarification business was impacted by both poor weather in the SeaKlear® line of recreation water products and lower overall activity in the construction industry, the main market for the HaloKlear™ line of environmental water products. Management changes were made in both of these businesses in 2011.

Growth in the Environmental Water business continues to progress, as the Company expands beyond its core HaloKlear™ storm-water remediation products. We believe that our proprietary rapid-acting, dual bio-polymer ("DBP") technology will drive growth in 2012 as evidenced by the recently announced partnership agreement with SIGSA to develop a dry-blend version of HaloKlear™ that can be successfully deployed in hydro-electric dam construction and dredging projects.

Antimicrobial Coatings

Beyond water technology, we expect that continued regulatory efforts with the U.S. Environmental Protection Agency ("USEPA") will result in our HaloShield®-powered textile products (marketed in the U.S. under the Clorox Freshcare™ brand) becoming the first and only textile products to carry pathogenic-killing technology.

Technology and Product Development

Innovative new technologies, intellectual property and products are opening up new channels and markets for us in Environmental Water, Recreational Water and Water Purification (drinking water).

Our new and unique bio-polymer technologies are facilitating expansion from the storm-water oriented Environmental Water category into the treatment of a broad range of industrial scale water treatment applications which include frac and drilling water treatment from oil and gas production to municipal and tunneling projects.

Our SeaKlear® Recreational Water products are widely recognized as innovative, high quality offerings and we are aggressively pursuing new product iterations both alone and with industry partners to rapidly build reach and share of our premium brand.

HSE and Employees

Employee headcount at the beginning of the year was 121 and as of 31 December 2011 stood at 138. Most of the increase is related to expansion of the Company's manufacturing capabilities in Bangalore, India.

Liquidity and Capital Resources

The Company ended the year with $13.4 million of cash and cash equivalents, restricted cash and short-term investments, having reduced the Company's cash burn by more than 30% in the second half of 2011 as compared with the first half of 2011. This was driven by cost containment across the entire organization and minimizing expenditures that are unmatched with customer and revenue commitments. The cash position of the Company is, and will continue to be, monitored closely whilst the Company looks to execute its revised strategy through 2012 and beyond. The Company believes cash balances on-hand as of year-end will be sufficient to execute against its new strategy during 2012.

Outlook

Management is confident that under its new leadership, results will improve in 2012 despite challenging trading conditions. In Water Clarification and Antimicrobial Coatings, we expect to continue to launch new products and expand distribution, primarily in North America. In Water Purification, our pipeline remains strong with key partners such as Bajaj and Eureka Forbes in India and other multi-national companies across China, Brazil and the U.S., all looking for technologies and products to address rising regulatory standards and help set them apart in the multi-billion dollar point-of-use drinking water market.

Note 1 - Annual Report

The financial information set out in this document does not constitute the Company's statutory accounts for 2010 or 2011. The results for 2011 are unaudited. Statutory accounts for the year ended 31 December 2011 will be finalized based on the information in this announcement.

Statutory accounts for the year ended 31 December 2010 have been reported on by the Independent Auditor. The Independent Auditors' Report on the Annual Report and Financial Statements for 2010 was unqualified and did not draw attention to any matters by way of emphasis.

The financial information set out in these preliminary results has been prepared using the recognition and measurement principles generally accepted in the United States of America ("U.S. GAAP"). The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2011. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2010. New standards, amendments and interpretations to existing standards, which have been adopted by the group, have not been listed since they have no material impact on the financial statements.

Note 2 - Litigation

On 2 December 2011, HaloSource was named as a defendant in a lawsuit, captioned Molycorp Minerals, LLC v. HaloSource, Inc., in the United States District Court for the District of Colorado. The complaint alleges that the Company breached certain provisions contained in non-disclosure agreements entered into in both 2009 and 2010, made fraudulent representations in the 2010 non-disclosure agreement, and misappropriated confidential information of the plaintiff. The plaintiff seeks injunctions enjoining the Company from the alleged breaches of contract and control over certain patent applications, damages in an unspecified amount, and a declaration of ownership by the plaintiff in certain patent applications filed by the Company. We believe the lawsuit is without merit and intend to defend against it vigorously.

Other than the matter noted above, as of 31 December 2011 and through 12 March 2012, the date this press release was approved, we were not involved in any other material pending litigation, claims or assessments.

Note 3 - Supplemental Information

As a supplement to our unaudited U.S. GAAP consolidated financial statements, we present certain non-GAAP adjustments which we believe will help investors evaluate the operating performance of the Company. These non-GAAP adjustments are not to be considered in isolation or as a substitute for U.S. GAAP measures. Their inclusion here is intended to provide additional insight into the operations of HaloSource, Inc.

Share-based compensation - U.S. GAAP requires the recognition of compensation expense for stock options based on certain accepted valuation models. The calculation depends on multiple estimates and subjective assumptions, especially for companies like HaloSource which have very limited share trading experience in public markets. The non-cash adjustment related to share-based compensation for 2011 includes the impact of accelerated share-based compensation recognized in relation to the Company's CEO transition discussed in further detail below. These charges were unique given these circumstances during 2011.

Severance and related costs - during 2011, HaloSource took steps to reduce its overall operating expenses and other capital commitments including the evaluation and prioritization of capital expenditures, cost reduction opportunities in R&D and SG&A, as well as reductions in headcount. Additionally, in October 2011, the Company announced the resignation of its former Chief Executive Officer, John Kaestle, and simultaneously announced the appointment of its new Chief Executive Officer, Martin Coles. The operating results for 2011 include severance and other similar costs associated primarily with the reductions in headcount and the CEO transition which the Company believes are of a unique and non-recurring nature.

Non-cash interest on convertible debt - U.S. GAAP requires an assignment of value to stock warrants and beneficial conversion features when they are embedded in convertible debt instruments. These values are treated as debt discounts and amortized as additional, but non-cash, interest expense over the life of the debt under U.S. GAAP. HaloSource retired the related debt during 2010 and had no similar charges in 2011.

Change in fair value of preferred stock warrants reported as a liability - U.S. GAAP requires the fair value of stock warrants for convertible preferred shares with embedded redemption features to be reported as a liability on the balance sheet. In addition, this liability must be revalued at each reporting date and any change in the fair value must be reflected through the statement of operations and comprehensive loss. Since the Company's qualifying warrants were not publicly traded, the fair value represented an estimate based on several subjective assumptions. In addition, the Company's qualifying warrants had strike prices identical to their potential redemption value. In addition, they were converted to common warrants as of the Company's initial public stock offering in October 2010 and no longer qualified as liabilities.

Foreign exchange loss on transfer of IPO proceeds, British pounds sterling to U.S. dollars - HaloSource had its first public offering of shares in October 2010 on the London AIM market. The offering was funded in British pounds sterling and the cash raised was transferred to the U.S. and converted into U.S. dollars. Between the date of the initial public offering and the conversion to U.S. dollars, exchange rates between the pound and the dollar changed in an unfavorable direction for the Company. Because of the type and source of funding in correlation with the Company's IPO, the Company believes that this exchange loss was a one-time event in 2010 and adjusting for this item helps to provide a more comprehensive understanding of the Company's performance in 2010.

Cautionary Statement:

This press release contains certain forward-looking statements. All statements contained in this press release that do not relate to matters of historical facts should be considered forward-looking statements. Forward-looking statements include statements with respect to the operations, performance and financial condition of the Company, the market for and benefits of its products and services, Company's introduction and deployment of new products, the potential benefits of business relationships with third parties, and the Company's plans and strategies for future growth. 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. These statements about future events are subject to risks and uncertainties that could cause HaloSource's actual results to differ materially from those that might be inferred from the forward-looking statements. HaloSource can make no assurance that any forward-looking statements will prove correct.

General Information:

The Company is incorporated and domiciled in the State of Washington, USA. The address of its registered office is 1631 220th Street SE, Suite 100, Bothell, WA 98021, USA.

The Company has its primary listing on the AIM market of the London Stock Exchange.

The 2011 unaudited preliminary financial statements were prepared under U.S. GAAP and were approved for issue on 12 March 2012.

The Company anticipates its 2011 audited consolidated financial statements and 2012 Annual Report will be available to shareholders the week of March 26, 2012.