Trading Update

9 January 2017

This announcement contains inside information

HaloSource, Inc.

("HaloSource" or the "Company")

Trading Update

HaloSource, Inc. (HAL.LN, HALO.LN), the global clean water technology company traded on London's AIM, today issues a trading update for its financial year ended 31 December 2016 ahead of its preliminary results for the period, which it expects to announce on 14 March 2017.

Revenues from continuing operations for the full year ended 31 December 2016 are expected to be not less than $2.0 million (2016: $4.2 million). Net cash at the year-end is expected to be approximately $2.1 million (2015: $4.6 million).

As previously announced on 3 November 2016, revenues for 2016 were impacted by decreased demand from our largest Chinese customer, Perfect Purification Manufacturing Company Ltd. ("Perfect"). Perfect has now resumed shipments against its approximately 600,000 unit installed base of in-home devices, each of which need annual replacement of HaloPure® powered cartridges to keep water safe. During 2016, the Company added several key development contracts for Asian product launches of HaloPure® enabled devices including with one of the world's largest device manufacturers, Midea Group, for a launch in India in 2017. Finally, our partner, Jarden, launched pitchers in Mexico in a limited number of stores of a US-based big box retailer late in 2016. Results of initial sales and a decision from the retailer to expand distribution of Jarden pitchers using HaloPure® to all of their stores in Mexico is expected to be known in Q1 2017.

During the year we also made solid progress on the development and scale-up of our new lead removal technology and we expect it to be available during H1 2017. This technology would enable us to offer a powerful combination of heavy-metal removal along with viral and bacterial disinfection already provided by HaloPure®.

The Company's Board has recently concluded its strategic review of options available to the Company, as previously announced on 3 November 2016, and will pursue either additional external equity financing or a sale of the Company.

James Thompson, Acting CEO of HaloSource, said:

"In addition to completing the disposition of our Environmental Water and Recreational Water businesses, we have also implemented a number of structural changes during 2016 which enable us to better focus on our Drinking Water business while also significantly reducing our operating costs. A majority of our commercial efforts are being driven by teams in the markets in which we do business, primarily China, with innovation driven out of the US, supported by a small technical team in India. To help address the customer concentration issues of a small business, in 2H 2016, we added 6 new customers in China and one new customer in India that we expect to contribute to increased revenues in 2017. The Asian markets for drinking water products are growing at 30-40% annually and these customers need technologies and regulatory approvals to launch differentiated products. These relationships and our growing pipeline are expected to deliver solid growth well into the future.

We remain focused on delivering our class-leading HaloPure® Drinking Water technology through current and future strategic partnerships with some of the world's leading household appliance brands."

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About HaloSource

HaloSourceä, 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, HaloSourceä has grown to become an influential leader in drinking water purification. HaloSourceä 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 HaloSourceä, Inc. All other trademarks, brand names or product names belong to their respective holders.

This document contains certain forward-looking statements relating to the Company. The Company considers any statements that are not historical facts as "forward-looking statements". They relate to events and trends that are subject to risk and uncertainty that may cause actual results and the financial performance of the Company to differ materially from those contained in any forward-looking statement. These statements are made by management in good faith based on information available to them and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.