HAL.L Regulatory News (HAL)

FOR IMMEDIATE RELEASE

11th July 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, the 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")

TRADING UPDATE

Seattle, U.S.A. - HaloSource, Inc. (HAL.LN, HALO.LN) the clean water technology company traded on London's AIM, announced today that it has made solid progress against its strategic initiatives during the first half of 2012 whilst generating six-month revenue of US$5.8 million, an increase of 7% from H1 2011. This included significant gains from its two main growth divisions, drinking water and environmental water. The Company has enjoyed positive momentum and improving results since implementation of its new strategic plan under the leadership of Chief Executive Officer, Martin Coles.

HaloSource will announce its half-year results on 3 August 2012. The Company takes this opportunity to provide an update on trading since 31 December 2011.

Trading

·; Overall revenue increased to US$5.8 million for H1 2012, up 7% from H1 2011

- Water Clarification revenues grew to US$4.9 million, up 8% from 2011. The Company's HaloKlear products were a primary driver with growth in excess of 200% over H1 2011 in the rapidly expanding environmental water business

- Water Purification revenues grew to US$0.7 million, up 41% from 2011

- Antimicrobial Coatings revenue was US$0.2 million, down 53% from 2011

·; Cash burn has been reduced by 50% from US$10.7 million during H1 2011 to US$5.4 million during H1 2012. At 30 June 2012, the Company had cash and cash equivalents, restricted cash and short-term investments totaling US$8.0 million.

Operating Performance

·; During the period under review, the Company signed agreements with three global partners related to four major project areas in its Water Purification and Water Clarification business segments:

o February 2012: 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 in Central and South America.

o April 2012: An exclusive partnership agreement with Perfect Water Purification Manufacturing Co. Ltd. ("Perfect") pursuant to which the Company will provide HaloPure® cartridges for use in pressurized water purification devices sold by Perfect through its direct sales channels in China. To date, the Company has shipped 45,000 cartridges under this contract.

o May 2012: A major supply agreement with PT. Basuki Water, Indonesia for sales of the Company's HaloKlear™ products throughout the Indonesian market. It is expected that first year sales will be approximately US$0.5 million.

o June 2012: An exclusive supply agreement with SIGSA for sales of certain HaloKlear™ DPS products in Latin America and Spain. To maintain exclusivity, SIGSA is required to purchase a minimum of US$0.5 million of products in the initial contract year, including US$0.25 million in H2 2012.

The Company continues to remain focused on its four previously announced strategic initiatives: 1) Driving deeper and more meaningful strategic partnerships with key industry players having significant geographic reach; 2) A relentless focus on consumer and end user driven technology innovation; 3) Driving brand awareness and "in use" experience with key end users and consumer groups in each business category; 4) Investing in its people ensuring the right people, in the right place, with the right skills, at the right time.

Since Martin Coles' appointment in October 2011, there have been a number of major changes in Sales, Marketing, Business Development and other operating functions around the world. This has significantly increased the capacity of local commercial leadership while shortening decision making time and improving the Company's ability to act on local opportunities.

Business Review

Water Clarification

The Water Clarification business saw continued growth over H1 2011 driven by rapidly increasing revenue in environmental water solutions using the Company's HaloKlear™ products. Revenues related to HaloKlear™ products and services increased over 200% in H1 2012 vs. H1 2011 and comprised 13% of total revenues in H1 2012 as compared to 5% for H1 2011. The Company continues to develop innovative products and partnerships through its HaloKlear™ offering and sees significant opportunity for growth in a variety of industries, including municipal water treatment, construction, oil and gas, and mining, each of which produces significant amounts of water requiring remediation before recycling or returning it to the environment.

Revenues in the U.S. pool and spa industry, sold primarily under the SeaKlear® brand, have been relatively flat despite an early start to the pool season due to generally warmer seasonal conditions across much of the U.S. The Company believes this is attributable primarily to high inventory levels, which remained with the Company's key distributors coming off a relatively weak pool and spa season in the prior year.

Mr. Coles said, "We remain confident that meaningful innovation coupled with our strong stable of existing products will enable us to drive solid growth in the medium to long term, in an industry that has become progressively commoditized over time. As with other segments of our business, we believe strong strategic relationships where we bring our science, technology and innovation to the partnership will allow us to redefine the game in the segments where we participate."

Water Purification

Water Purification revenues increased by 41% resulting largely from the newly signed partnership with Perfect in China. The Company considers the Perfect relationship as key in terms of its entry into the consumer device market in China. The partnership with Perfect ties directly into the Company's strategy of developing relationships with leading companies that can successfully deploy water purification devices powered by our HaloPure® media.

The Company continues to focus on its relationships with key market participants including Eureka Forbes and Bajaj in India while driving innovation, new strategic partnerships and consumer awareness of the efficacy of the disinfecting power and benefits of water purification devices powered by HaloPure® media.

Anti-microbial Coatings

Revenues from anti-microbial coatings were US$0.2 million in H1 2012, down 53% from the prior year. The Company considers the lower revenue to be primarily a timing issue associated with a packaging change in its existing business. Despite these circumstances, the Company remains bullish on the opportunity for sustainable growth through innovation-led expansion of its product offering created in collaboration with its existing partners.

Outlook

The Company will continue to drive growth through expansion of strategic global partnerships and maintaining focus on its strategic initiatives. The Company has demonstrated revenue growth in its primary operating segments in H1 2012 and believes acceleration of its product and technology innovation will create opportunities for continued growth.

Martin Coles commented, "I am encouraged by our progress so far in 2012. We are gaining traction across all aspects of our business from innovation to partner relationships that are deeper and closer to our end-user. We have enormous opportunities in every business segment and we are barely scratching the surface of the potential that already exists today. We are also making significant progress in improving our capacity to execute and we are building the team on the commercial and innovation side of our business to ensure that we are able to sustain rapid business growth. Our innovation pipeline is expanding rapidly and we are confident that this will power our efforts to create meaningful differentiation for our customers in the industries we serve."

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® media became the first drinking water technology in 30 years to be registered by the United States Environmental Protection Agency ("USEPA"). In 2010, HaloPure® media 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.

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.