Halosource (Di) Regulatory News (HALO)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

THIS ANNOUNCEMENT IS NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, TO ANY US PERSONS OR IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA.

HaloSource, Inc.

("HaloSource" or the "Company")

£2.8 million Placing of up to 166,940,688 New Common Shares,

Subscription of 58,094,124 New Common Shares and

Notice of Annual General Meeting

Highlights

· £2.8 million raised from new and existing shareholders to drive commercialisation of Company's lead reduction technology and astrea® brand

· Significant progress made in lead-removal

· Business strategy geared to pursuing cashflow break-even target in the near future, following already significant reduction in operating expenditure and rationalisation of core business

· Directors to pursue potential re-domicile of the Company

HaloSource Inc. (HAL.LN, HALO.LN), the global clean water technology company traded on London Stock Exchange's AIM market, is pleased to announce a proposed fundraising of £2.8 million ($3.8 million) (before expenses) through the issue of an aggregate of 225,034,812 new common shares of no par value ("New Common Shares") to new and existing investors at a price of 1.25 pence per New Common Share (the "Issue Price") (the "Fundraising"). The New Common Shares will rank pari passu in all respects with the existing common shares of no par value in issue ("Common Shares").

Completion of the proposed fundraising is conditional upon, inter alia, passing of resolutions by shareholders at the Annual General Meeting of the Company in order to ensure that the Directors have the necessary authorities and powers to allot the New Common Shares for cash on a non-pre-emptive basis. Notice of the Annual General Meeting is included in the circular which is being posted to Shareholders today (the "Circular"). The background to and reasons why the Board believes that the proposed fundraising is in the best interests of the Company and its shareholders as a whole and why the Directors unanimously recommend that shareholders vote in favour of the resolutions contained in the Circular are set out below.

The Company expects to issue 166,940,688 New Common Shares pursuant to a placing agreement entered into by the Company with its broker (the "Placing Agreement") (the "Placing"), such shares to be issued to investors in the United Kingdom. Subscribers have also entered into conditional subscription agreements (the "Subscription Agreements") with the Company to subscribe for an aggregate of 58,094,124 New Common Shares (the "Subscription").

The net proceeds of the Placing and Subscription (together the "Fundraising") will be used to provide additional working capital to the Company and to fund the commercialisation of the Company's lead reduction technology and continue the growth of its drinking water business given the progress made in both the business to business ("B2B") and business to consumer ("B2C") channels and for the Directors to pursue the potential re-domicile of the Company.

The Issue Price represents a discount of approximately 9 per cent. to the mid-market closing price of 1.38 pence on 14 December 2017. The Fundraising is not being underwritten and is conditional on, inter alia, the passing of a resolution to waive pre-emption rights in respect of the Fundraising by shareholders at the Annual General Meeting of the Company to be held at 1725 220th Street SE, Suite 103, Bothell, Washington 98021 at 9.30 a.m. on 27 December 2017.

The New Common Shares will represent approximately 40 per cent. of the issued share capital of the Company as enlarged by the Fundraising (the "Enlarged Share Capital").

Application will be made to the London Stock Exchange for the New Common Shares to be admitted to trading on AIM ("Admission"). The New Common Shares will rank pari passu in all respects with the Common Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of the Common Shares following Admission. It is expected that such Admission will become effective, and that dealings on AIM will commence, at 8.00 a.m. on 29 December 2017. Following Admission, the Company's issued share capital will consist of 337,970,964 Common Shares.

Related party transaction

Invesco Asset Management Limited and Woodford Investment Management Limited are substantial shareholders of the Company (the "Substantial Shareholders") and therefore classified as related parties under the AIM Rules for Companies ("AIM Rules"). Alan Matthews, James Thompson, Craig Crowell, Massoud Entekhabi and Kent Johnson (the "Participating Directors") are, by virtue of their directorships of the Company, also related parties of the Company under the AIM Rules. The Substantial Shareholders and Participating Directors (together the "Related Parties") participation in the Fundraising is considered a related party transaction under the AIM Rules.

The Directors of the Company, having consulted with the Company's nominated adviser, Cantor Fitzgerald Europe, consider that the terms of the Substantial Shareholders' participation in in the Fundraising is fair and reasonable insofar as the Company's Shareholders are concerned.

In the absence of an independent director, Cantor Fitzgerald, as the Company's nominated adviser, considers that the terms of the Participating Directors' investment are fair and reasonable insofar as the Company's shareholders are concerned.

The Related Parties interest in the Company, following Admission, will be:

Expected timetable

Each of the times and dates above is subject to change. Any such change will be notified by an announcement on a Regulatory Information Service.

Background to and reasons for the Fundraising

As announced in the Company's interim results for the six months ended 30 June 2017, the Company has focused on stabilising its cost base, with a year-on-year reduction in operating expenditure of 38% while also reducing its year-on-year net loss by 29%.

The Company has made significant progress in the area of lead-removal, including its manufacturing scale-up agreement with Chematek, SpA and has restructured its supply-chain, having exited manufacturing in India and then having signed an agreement with a new e-commerce distribution partner in China (JiuBan).

Focusing on the core commercial activities of the business, along with the continued development of a new, proprietary heavy-metal removal offering, has led to the launch of the Company's own branded line of hydration products under astrea™, which has now launched through Amazon into the Indian market. HaloSource has also partnered with Seven Step Ecotech Co. Ltd ("Seven Step") to launch a new line of purifying water bottles for the Asian market, powered by HaloSource's HaloPure® disinfection technology, which will leverage Seven Step's distribution channels in India and Indonesia.

HaloSource has already announced its intention to reach cashflow break-even in the near future, and with the recent progress made by the Company in its product launch, distribution agreements and more recently its global partnership with Water.org, the Company continues to pursue cashflow break-even by building on the strategic and operational initiatives it has already implemented. The profitable growth of the Company's key product lines is the Company's immediate objective. HaloSource will continue to pursue its restructuring, lowering its break-even point further and building upon the already significantly reduced cash-burn.

To support this strategy, the Company has launched the Fundraising to provide the additional working capital required by the Company to finance the commercialisation of the Company's lead reduction technology and continue the growth of HaloSource's drinking water business. The Company will use the net proceeds of the Fundraising to pursue its existing business pipeline, primarily in China, and focus on monetising its fully invested technology within drinking water in multiple markets with multiple partners and products.

James Thompson, CEO of HaloSource, said:

"We are very pleased by the response of the capital markets in supporting our augmented commercialization strategy. With this additional capital, we now have all of the pieces in place to drive a significant outcome for our shareholders."

For further information, please contact:

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. 

The HaloPure® and astrea® brands are registered trademarks of HaloSource, Inc. All other trademarks, brand names or product names belong to their respective holders.

Forward-looking statements

This announcement contains statements about HaloSource Inc. that are or may be deemed to be "forward-looking statements".

All statements, other than statements of historical facts, included in this announcement may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "anticipates", "estimates", "projects", "would", "could", "continue" or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include, without limitation, statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects and (ii) business and management strategies and the expansion and growth of the operations of HaloSource Inc.

These forward-looking statements are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules, the Prospectus Rules and/or the FSMA), HaloSource Inc. does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to HaloSource Inc. or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this announcement are based on information available to the Directors of HaloSource Inc. at the date of this announcement, unless some other time is specified in relation to them, and the posting or receipt of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date.

Details of the Placing and Subscription

The Company has today announced that it has conditionally raised, in aggregate, £2.8 million ($3.8 million) (before expenses) by way of a Placing of 166,940,688 New Common Shares and a Subscription for 58,094,124 New Common Shares with certain new and existing investors representing 40 per cent. of the Enlarged Share Capital, at an Issue Price of 1.25 pence per New Common Share. All of the Placing Shares have been conditionally placed pursuant to the Placing Agreement.

The Issue Price of 1.25 pence per New Common Share represents a discount of approximately 9 per cent. to the closing price of 1.38 pence on 14 December 2017, being the last business day prior to the publication of the announcement of the Fundraising. The Board unanimously agrees that the level of discount and method of issue are appropriate to secure the investment necessary in order to provide funds for the growth and development of the Company.

The Placing and Subscription are conditional on, inter alia:

· The passing of the requisite resolution at the Annual General Meeting;

· The conditions in the Placing Agreement being satisfied or (if applicable) waived and the Placing Agreement not having been terminated in accordance with its terms prior to Admission; and

· Admission becoming effective by no later than 8.00 a.m. on 29 December 2017 (or such time and / or date, being no later than 12 February 2018, as the Company and its broker may agree).

Accordingly, if any of these conditions are not satisfied or, if applicable, waived, the Placing will not proceed.

In connection with the Subscription, the subscribers have entered into the Subscription Agreements.

Terms of the Placing Agreement

Under the terms of the Placing Agreement, the Company's broker has agreed to use its reasonable endeavours, as an agent to the Company, to place the Placing Shares at the Issue Price with certain investors.

The Placing is not being underwritten.

The Placing Agreement provides for payment of certain fees and commissions.

The Placing Agreement contains customary warranties given by the Company in relation to, inter alia, the accuracy of the information in this announcement, certain financial information and other matters relating to the Company and its business. In addition the Company will provide certain indemnities in respect of certain liabilities in connection with the Placing.

The Placing Agreement may be terminated in certain customary circumstances prior to Admission, including if: (i) the Company is in breach of the terms of the Placing Agreement (including the warranties); and/or (ii) there occurs a material adverse change in or an event having a serious adverse effect on any of the financial markets, or the operations, condition (financial or other), trading position or prospects or results of operations of the Company.

If this right is exercised, the Placing will not proceed.

The Placing Agreement is not subject to any right of termination after Admission.

Annual General Meeting

A notice convening the Annual General Meeting to be held at 1725 220th Street SE, Suite 103, Bothell, Washington 98021 at 9.30 a.m. on 27 December 2017 will be posted to shareholders. The resolutions to be proposed at that meeting are summarised below.

1. Ordinary Resolution - approve the re-election of the following directors of the Company: James Thompson, Craig Crowell, Kent Johnson and Massoud Entekhabi.

2. Special Resolution - disapplication of the shareholders pre-emption rights in connection with the proposed issue of New Common Shares pursuant to the proposed Fundraising.

3. Ordinary Resolution - approve the re-appointment of the Company's auditor, BDO USA LLP.

4. Ordinary Resolution - approve the remuneration of the Company's auditor.

Directors' Shareholdings

The beneficial and non-beneficial interests of the Directors and persons closely associated with them in Common Shares at the date of this announcement and following the Fundraising are set out in the table below.

Action to be taken in respect of the Annual General Meeting

Shareholders should check that they have received with the notice of meeting:

· A form of proxy or form of instruction for use in respect of the Annual General Meeting; and

· A reply-paid envelope for use in conjunction with the return of the form of proxy.

Whether or not Shareholders propose to attend the Annual General Meeting in person, Shareholders are strongly encouraged to complete, sign and return their form of proxy in accordance with the instructions printed thereon as soon as possible, but in any event so as to be received, by post to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY or by hand to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, during normal business hours only, by no later than 4:00 p.m. on 21 December 2017 (or, in the case of an adjournment of the Annual General Meeting, not later than 48 hours before the time fixed for the holding of the adjourned meeting (excluding any part of a day that is not a business day in England)).

If Shareholders hold their shares in the Company in uncertificated form (that is, in CREST), those Shareholders may vote using the Form of Instruction or the CREST Voting Service in accordance with the procedures set out in the CREST Manual (please also refer to the accompanying notes to the Notice of General Meeting set out in the Circular). Voting instructions submitted via CREST must be received by the Company's Depositary (Computershare Investor Services PLC) by no later than 4:00 p.m. on 20 December 2017 (or, in the case of an adjournment, not later than 72 hours before the time fixed for the holding of the adjourned meeting (excluding any part of a day that is not a Business Day)).

Appointing a proxy in accordance with the instructions set out above will enable shareholder votes to be counted at the Annual General Meeting in the event of Shareholder's absence. The completion and return of the form of proxy will not prevent shareholders from attending and voting at the Annual General Meeting, or any adjournment thereof, in person should shareholders wish to do so.

Recommendation

The Directors of the Company believe that the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and Shareholders as a whole and unanimously recommend that shareholders vote in favour of the Resolutions.

THIS ANNOUNCEMENT IS NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA. THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE INTO THE UNITED STATES. THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES, EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM REGISTRATION. NO PUBLIC OFFERING OF SECURITIES IS BEING MADE IN THE UNITED STATES.