HAL.L Regulatory News (HAL)

 26 July 2016

This announcement contains inside information

HaloSource, Inc.

("HaloSource" or the "Company")

TRADING UPDATE

HaloSource, Inc. (HAL.LN, HALO.LN), the global clean water technology solutions company traded on London's AIM, today issues a trading update for the six-month period ended 30 June 2016.

Following the sale of the Company's Recreational Water and Environmental Water businesses ("Discontinued Segments"), total revenue from continuing operations for the period ended 30 June 2016 was $1.4 million (H1 2015: $2.7 million). Drinking Water revenue for H1 2016 was primarily impacted by manufacturing related production stoppages at one of our key customers in China (unrelated to product supplied to the customer by HaloSource), resulting in customer orders in hand of approximately $750,000 not being shipped. However, our customer's manufacturing challenges have now been resolved and they restarted production in July 2016. Revenues were also impacted by lower than expected revenues from major customers in India and Latin America, which more than offset better than expected sales to the Company's second largest customer in China.

The Company continues to make significant reductions in its operating expenses, having transferred much of the responsibility for short and medium term operation of the Drinking Water business from the US to its Chinese and Indian business units and disposing of the Discontinued Segments in H1 2016. Headcount at our US facility was reduced from 50 to 22 during H1 2016, and the Company intends to further reduce operating expenses in H2 2016 whilst maintaining the integrity of its operations and continuing to develop new products for both existing and new customers.

At 30 June 2016, the Company had a cash balance of $4.1 million and was debt free. The Company currently expects a further cash infusion of approximately $2.9 million to be received in August 2016 from the purchaser of the Company's Recreational Water business. Given the reduction in revenue from continuing operations compared to the prior year, management expects that revenue for 2016 will be in a range of $4 million to $6 million. Management continues to expect net loss for 2016 will be in line with current market expectations primarily as a result of an expected gain on sale from the disposal of our Recreational Water business.

Whilst our business continues to build on a strong base of customer relationships with some of the world's best known participants in the Drinking Water segment in China, India and the Americas, we are also diversifying our application mix beyond gravity fed water devices by penetrating the fast growing reverse osmosis market, initially in China. Our HaloPure® disinfection technology has been used to provide compliance with biofilm and recontamination regulation in an increasing number of existing partner reverse osmosis devices, which we believe is an exciting new category for us.

The Company continues to strengthen its intellectual property portfolio with the development of its HaloPure® adsorption media for lead removal, which is in the final stages of commercialisation and is expected to be available to customers in early 2017. With this technology platform, we are building on our existing HaloPure® business to introduce new solutions in additional point-of-use segments such as pitchers, bottles and in line applications as quickly as possible to deal with both heavy metal and biological contaminant removal.

Martin Coles, CEO of HaloSource, commented:

"During the first six months of 2016 we exited two of our three business segments and significantly reduced our operating costs as critical first steps in our strategy of becoming the technology solutions provider of choice for multi-national companies operating in the Drinking Water sector. The Company remains committed to accelerating commercialisation of our unique, proprietary water purification technologies by leveraging both the go-to-market capacity of our existing customer base and aggressively adding new players at the regional level. Against this backdrop, we expect to deliver gross margin expansion and tight control of operating expenses in addition to revenue growth."

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About HaloSource

HaloSource, Inc. innovates and integrates technologies to deliver clean, drinking water solutions to partners with trusted brands around the world. The Company works with scientists and industry experts across the globe in search of new ways to improve drinking water quality and has been awarded more than 30 patents for its ground breaking chemistries, which provide safe drinking water for more than 10 million consumers globally. The Company's class-leading HaloPure® Drinking Water technology has the highest global certifications, including registration with the US EPA.

Founded in Seattle, Washington, HaloSource has grown to become an influential leader in drinking water purification. HaloSource is headquartered in the US with operations in China and in India. Learn more about the Company's research and development and future cutting edge technologies by visiting www.halosource.com.

HaloPure is a registered trademark of HaloSource, Inc. All other trademarks, brand names or product names belong to their respective holders.