HAL.L Regulatory News (HAL)

FOR IMMEDIATE RELEASE 7 FEBRUARY 2012

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, Inc.

Trading UPDATE

Seattle, U.S.A. - HaloSource, Inc. ("HaloSource" or "the Company") (HAL.LN, HALO.LN), the clean water and antimicrobial technology company, will announce its preliminary results for the year ended 31 December 2011 on or around 13 March 2012.

The Board of the Company is taking this opportunity to provide the market with an update of activity through the second half of 2011 and give some perspective on the preliminary outlook for 2012.

Highlights

·; Revenue for the full year ended 31 December 2011 is expected to be $12.0 million, in line with market expectations announced in October 2011. Cash and cash equivalents were approximately $13.4 million at the year-end. The Company is expected to have adequate capital reserves to fund its 2012 plan.

·; As announced on 21 October 2011, the Company appointed Martin Coles as its new President and CEO. Martin brings a wealth of knowledge and experience in consumer marketing, sales and operations both internationally and domestically with over 33 years at some of the world's most recognized brands including Procter & Gamble, PepsiCo, Nike, Reebok and most recently as President of Starbucks Coffee International. Following a strategic review by the new CEO, several key initiatives have been identified and are now being executed to drive growth in 2012, including:

o Cultivating deeper strategic relationships with a select few industry players across the segments of the business.

o Focusing on core competencies while eliminating distractions

o Building brand awareness with a relentless focus on technology innovation.

·; The Company has worked closely with Bajaj, its exclusive distributor of the Company's Waterbird water purification device in India, to implement several product enhancements together with revamped packaging and key design improvements which management believes will drive growing unit sales through the Bajaj distribution channel during the upcoming 2012 monsoon season.

·; New HaloPure customers added during the second half of 2011, and joint development agreements ("JDA") signed with two multi-national corporations ("MNC") for potential product launches in H2 2012.

·; Regulatory: China Ministry of Health ("MOH") approval for first HaloPure pitcher cartridge.

HaloSource's CEO, Martin Coles, commented :

 "We are seeing a significant increase in partner interest in adopting our innovative and protected technology, including by a number of significant MNC's. These companies are targeting fast growing water segments and need class leading and approved technology to offer the highest performing solutions. Our technology portfolio continues to be unmatched in breadth, performance and regulatory approval and we will continue to focus our attention on adding targeted and significant global partners in 2012, and beyond."

Strategic Initiatives

Martin and the leadership team have conducted a three-month strategic review and have implemented a revised company strategy, focusing on the Company's core expertise in technology and its application for the needs of its global partners. The Company is looking to build new customer relationships whilst enhancing existing customer relationships in the Company's main markets of US, India and China with companies such as Pool Corp., Bajaj and Eureka Forbes. The Company's new strategy incorporates the following core principles as key to driving growth:

·; Cultivating deeper more meaningful strategic relationships with select industry players across all segments of the business enabling the Company to expand its reach and application of its innovative technologies (geography, product, and channel). Being more open to structures that leverage core competencies of each party.

·; Focusing on product innovation around the Company's core technologies in its various segments.

·; Building brand awareness with a relentless focus on the end user, understanding their needs and developing appropriate solutions using the Company's unique technologies and approach.

·; Investing in our people to ensure we have the right talent in the right places at the right time in line with our growth ambitions, partnerships and key markets.

With these strategic initiatives now well into implementation, the Company is focused on building a strong, sustainable and rapidly growing global business where its core expertise in technology and its application marries up with the strengths of its global strategic partners.

In conjunction with the corporate strategy initiatives, the Company has also taken steps to reduce all costs in the business. To that end, the cash burn for the business dropped in excess of 30% in H2 2011 over H1 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 throughout 2012, and beyond.

2011 Results

The Company had a difficult year of trading, with expected revenue of approximately $12.0 million for the full year.

The Company expects the approximate breakdown of revenues for the full year to be:

·; Water Clarification revenue of $10.0 million.

·; Water Purification (HaloPure drinking water) revenue of $1.4 million.

·; Antimicrobial Coatings revenue of $0.6 million.

Operational Review

The Company's water clarification unit was doubly impacted by poor weather in the SeaKlear line of recreation water products and lower overall construction activity in the HaloKlear line of environmental water products. Management changes have been made in both of these businesses and we believe these changes, combined with a better macro environment, will lead to much improved execution in 2012.

As previously reported, the Company's drinking water unit was significantly impacted by manufacturing challenges associated with its newly developed Waterbird household water purifier launched with Bajaj in India. This delay ultimately resulted in a late product launch missing most of the 2011 key monsoon season in India, a very big driver of seasonal demand for water purifiers. Over the past several months, the Company has worked closely with Bajaj, to implement several product enhancements together with revamped packaging and key design improvements. Management believes these changes will drive unit sales through the Bajaj distribution channel during the upcoming 2012 monsoon season. In addition, during the fourth quarter the Company worked with Bajaj on a program that placed Waterbird units in the field targeting an encephalitis outbreak in Gorakhpur.

Other areas of commercial progress since the trading update announced in October 2011 include:

·; Shipped first order of pitchers to a Major US OEM for retail distribution.

·; Orders commenced to a Malaysian-based RO partner.

·; Signed an agreement for Waterbird, UTC, and pitchers for retail distribution in Africa, Middle East and Russia with Water Applications Limited.

·; Signed a JDA for a second generation, air-to-water generator cartridge (current customer).

·; Orders commenced to a partner in Indonesia for HaloPure water pitchers.

·; Shipped the first Waterbird order for a trial targeting the NGO category via our partner Del Agua.

·; Signed a JDA with a Latin American environmental water distributor for the use of HaloKlear in treating environmentally sensitive run-off associated with hydro-electric and dredging projects. The Company shipped this partner product orders during the fourth quarter of 2011 to support this project.

Subsequent progress in H1 2012 to date includes:

·; Signed a JDA with a second major MNC for the launch of a low-cost water purification device powered by HaloPure targeting the emerging markets for which unit sales may commence during H2 2012.

Regulatory progress since H1 2011 includes:

·; Received its first China MOH approval of a HaloPure powered pitcher cartridge, a critical and major milestone for the Company.

·; In Brazil, the Company overcame a technical hurdle related to the test methodology of the national industry standards body. With this achievement, the Company is hopeful this will pave a way for realization of orders from its Brazilian partners.

The Company's out-licensing based HaloShield unit remains primarily tied to its combined relationship with 1888 Mills and Clorox. Management continues to believe that regulatory approval on product claims is the key to growth in this segment, and this effort continues with the US Environmental Protection Agency.

Outlook

Despite challenging trading conditions, management is confident that under its new leadership, results will improve in 2012. This will be driven by further implementation of our new strategic framework, better execution with key partners and customers including Bajaj, Eureka Forbes and meaningful engagement with several newly signed partners in China, India, Brazil and the US. As we begin 2012 we are already starting to see the desired results of these efforts.

For further information:

About HaloSource

HaloSource is a clean water technology company, headquartered in Seattle, U.S. 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 and is considered 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. In 2009, it became the first new drinking water technology company in 30 years to be granted both Manufacture-For-Use and Device registrations by the United States Environmental Protection Agency ("USEPA"). In 2010, HaloPure was the first new drinking water technology ever to be approved by China Ministry of Health ("MOH"). Both US EPA and China MOH are both widely recognized as the world's most stringent performance requirements for water purification, a key differentiator for multi-national partners.

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 HaloSource'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% 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% 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%, 21% and 18%, respectively.

The World Health Organization 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.