Preliminary Results Announcement

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.

Preliminary results announcement

Seattle, U.S.A. - HaloSource, Inc. ("HaloSource" or "the Company") (HAL.LN, HALO.LN) the clean water and antimicrobial technology company traded on London's AIM, today announces its preliminary results for the year ended 31 December 2010.

2010 Highlights

·; Group revenue up 20% to $14.1million (2009: $11.8 million)

- HaloPure® Drinking Water revenue up over 40% to $1.7 million (2009: $1.2 million)

- Environmental Water revenue up over 98% to $1.4 million (2009: $0.7 million)

- Core Recreational Water business continued to grow at more than double industry growth rates

·; Fully funded following IPO on AIM and well positioned for growth in 2011 with cash and short term investments balance of $31.2 million at 31 December 2010

·; Partner Bajaj Electricals launched the first of a line of HaloPure-powered drinking water devices for the Indian market

·; Movement up the value chain with the development of a range of standard cartridges and OEM finished devices in the HaloPure business

·; Completed major steps in the national certification of HaloPure in China

·; HaloPure-powered pitcher product first to be registered with USEPA

·; Reached protocol approval with USEPA to provide a pathway to public health claims in the HaloShield coatings business

·; Completed the acquisition of the AquaPill™ product line in the Recreational Water business

Post Period-End Events

·; New supply agreement signed with US-based AWG International for launch of a HaloPure-powered device in emerging markets in 2011

·; Supply agreement signed today with Fairey Industrial Ceramics Limited (FICL), the UK based sole manufacturer of the world-famous range of Doulton®, British Berkefeld® and Fairey® ceramic drinking water filters

John Kaestle, President and Chief Executive of HaloSource Inc, said:

"I am pleased with our performance in 2010 which has been driven by the strong growth of our water businesses. In the drinking water space, partnerships in India with Eureka Forbes and Genpure are driving sales of our HaloPure products and I am confident that our new partnership with Bajaj Electricals, India's largest white goods producer, will take this growth to a new level in 2011. We are also working closely with a number of new and existing partners to supply finished HaloPure devices and cartridges in India, which underpins our strategy of moving up the value chain. In 2010, we completed major steps in having HaloPure approved in China and we expect full certification in the first half of 2011, opening a very large and growing drinking water market.

"HaloSource's IPO on London's AIM market in late 2010 was well received by an exceptional group of blue-chip institutional investors, and we are excited about our prospects going forward."

Enquiries

About HaloSource

HaloSource is a clean water technology company, headquartered in Seattle, US 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. In 2009, it became the first new drinking water technology in 30 years to be granted both Manufacture-For-Use and Device registrations by the United States Environmental Protection Agency (USEPA), which is widely recognized as having the world's most stringent performance requirements for water purification. HaloPure is 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.

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 per cent 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 per cent 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 per cent, 21 per cent and 18 per cent, 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.

HaloSource, Inc.

Statement by the Chairman and CEO

Overview and Financials

In a challenging environment, 2010 Group revenue rose more than 20% to $14.1 million, with strong progress in both the Environmental and Drinking Water revenues which grew 98% and 40% on the year, respectively. We have invested in these categories as a strategic priority and will continue to strengthen the teams supporting these divisions in order to upgrade our operational capacity.

Operating expenses totaled $15.6 million for the year and the US GAAP loss for the year was $11.5 million. Our gross margin for the year was 46.4%, which was below expectations due to slower than anticipated realization of supply contracts in the latter part of 2010. We fully expect these contracts to be signed in early 2011 and expect that margins will improve as sales volumes grow.

HaloSource's growth platform was reinforced by the Company's successful IPO on 18 October 2010. After debt repayment of $14.5 million and the $3 million acquisition of the AquaPill product line on 2 December, the group had cash and short term investments balances at 31 December 2010 of $31.2 million.

Business Review

HaloPure Drinking Water

Sales of HaloPure cartridges to existing Indian partners, Eureka Forbes and Genpure, grew in 2010. Our position in the market was boosted when Bajaj Electricals, a major distributor and retailer across India, launched its first HaloPure-powered product on 21 December. We have also made encouraging progress on a series of pending distribution agreements with multi-national and regional companies for whom India is a focus market. Expansion of the HaloPure manufacturing facility in India to effectively double its capacity is progressing and is due for completion at the end of the second quarter 2011. Additional capacity to support cartridge and device assembly expansion in China is also underway. Beyond India and China, HaloPure cartridges or components are now being sold in Brazil, Israel, Greece, Croatia, Turkey and Thailand.

The Company continued to integrate HaloPure technology into partner company products and has also completed the development of a range of OEM finished products, including a range of disinfecting HaloPure-powered pitchers for in-home consumer use and a gravity-powered canister purifier for use in households in emerging markets. The HaloPure Waterbird™ gravity unit is available in three different designs and can treat water for a family of five for up to six months. Commercial agreements for their distribution are pending in India, Brazil, the US, Canada and Mexico.

We completed major steps in the national certification of HaloPure in China and we expect to receive full Ministry of Health clearance during the first half of 2011. In anticipation of this, the Company has shipped a commercial scale order to a multi-national drinking water device manufacturer with plans to launch in China.

The Water Quality Association (WQA) India Task Force has recently developed a series of revised regulatory recommendations for water purification devices that address the need for improvements in virus performance, contributing to new interest in HaloPure amongst manufacturers.

Water Clarification

HaloSource continues to build a strong Recreational Water business with a full line of specialty recreational water cleaning and clarifying products. Acquisition of the AquaPill product line on 2 December 2010 provides further growth opportunities in Recreational Water through greater distribution and new formats for our SeaKlear® branded products.

Growth in the Environmental Water business continues to progress, as we expand beyond our core StormKlear storm-water remediation products. We believe that our proprietary rapid-acting, dual bio-polymer technology will drive growth in 2011 by providing solutions in new applications such as oil and gas produced water remediation. A nationwide distribution agreement with a Fortune 500 service provider is also pending.

Antimicrobial Coatings

Beyond water technology, we expect that continued regulatory efforts with the USEPA will result in our HaloShield-powered textile products (marketed in the US under the Clorox Freshcare™ brand) becoming the first and only textile products to carry pathogenic-killing technology during 2011.

Technology and Product Development

We have developed our own range of standard HaloPure-powered cartridge solutions and the completion of the first in a series of OEM HaloPure-powered finished devices has cemented our plans to move up the value chain in the Drinking Water segment. We have invested in developing a deeper understanding of consumer trends, and building a strong product-to-market strategy, positioning us well for further expansion in this business. Our partners are now viewing us as problem solvers to their product portfolio needs and this is driving growth in this business.

New technologies, intellectual property and products are opening up new channels and markets in Environmental Water, Recreational Water and Drinking Water. Our new biopolymer technologies are facilitating our expansion in the storm-water oriented Environmental Water category to now encompass treatment of a variety of run-off water from oil and gas production, and explore the use of these technologies in delivering greater productivity in bio-fuel harvesting and delivery. Our SeaKlear branded Recreational Water products are well recognized as innovative, high quality offerings and the development of HaloSource branded versions of these products to appeal to mass markets will help us deliver growth well beyond specialty stores.

Regulatory

With water-related regulatory hurdles increasing internationally, HaloSource is well positioned to both anticipate and respond with viable commercial solutions. In 2010, we achieved additional regulatory approvals, clearances and registrations for our HaloPure drinking water solutions and our Environmental Water products, each of them key to the group's distribution expansion. We made progress this year in our goal to achieve Ministry of Health registration of HaloPure as an approved new disinfection technology in China and we expect final approval to occur in the first half of 2011. This will enable the adoption of HaloPure technology in China by a variety of domestic and international companies with plans for China-oriented device sales.

HSE and Employees

Quality systems have been central to the growth and development of our operations and ISO 9000 quality certifications are pending in both our Shanghai and Bangalore facilities. In addition, a strong commitment to employee health and safety (EHS) has resulted in a perfect EHS record for 2010 across all our facilities. Employee headcount at the beginning of the year was 102 and as of 31 December 2010 stood at 116. With rapid expansion of activities throughout 2011, we plan to add approximately 90 additional staff, many of them in operational and semi-professional roles in India and China, bringing our expected headcount to 206.

Outlook

We are pleased with the progress we have made in commercializing technologies across all of our business lines. In Recreational Water, Environmental Water and Antimicrobial Coatings, we expect to continue to launch new products and expand distribution, primarily in North America. In Drinking Water, our partner pipeline has never been more robust, with companies on multiple continents looking for technologies and products to address the rising regulatory standards and help set them apart in the multi-billion dollar point-of-use drinking water market.

Note 1 - Annual Report

The financial information set out in this document does not constitute the Company's statutory accounts for 2008, 2009 or 2010.Statutory accounts for the years ended 31 December 2009 and 31 December 2008 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2009 and 2008 was unqualified and did not draw attention to any matters by way of emphasis.The results for 2010 are unaudited. Statutory accounts for the year ended 31 December 2010 will be finalised based on the information in this announcement.

Note 2 - Supplemental Information

As a supplement to our unaudited US-GAAP consolidated financial statements, we present certain non-GAAP adjustments which we believe will help investors evaluate the operating performance of the company. These non-GAAP adjustments are not to be considered in isolation or as a substitute for US-GAAP measures. Their inclusion here is intended to provide additional insight into the operations of HaloSource Inc.

Share-based compensation - US-GAAP requires the recognition of compensation expense for stock options based on a certain accepted valuation models. The calculation depends on multiple estimates and subjective assumptions, especially for companies like HaloSource which have very limited share trading experience in public markets. We believe that removing non-cash estimates of this type can provide investors with additional understanding of the company's business operations and financial performance.

Non-cash interest on convertible debt - US GAAP requires an assignment of value to stock warrants and beneficial conversion features when they are embedded in convertible debt instruments. These values are treated as debt discounts and amortized as additional, but non-cash, interest expense over the life of the debt under US-GAAP. HaloSource retired the related debt during 2010 so these charges will not be repeated in the foreseeable future. We believe that identifying these amounts can increase investors' understanding of the underlying cash flows of the company.

Change in fair value of preferred stock warrants reported as a liability - US-GAAP requires the fair value of stock warrants for convertible preferred shares with embedded redemption features to be reported as a liability on the balance sheet. In addition, this liability must be revalued at each reporting date and any change in the fair value must be reflected through the statement of operations and comprehensive loss. Since the company's qualifying warrants were not publicly traded, the fair value represented an estimate based on several subjective assumptions. In addition, the company's qualifying warrants had strike prices identical to their potential redemption value. In addition, they were converted to common warrants as of the company's initial public stock offering and no longer qualified as liabilities. We believe that understanding the related amounts can aid investors' understanding of the underlying operating results of the company.

Foreign exchange loss on cash held in non-US currency - HaloSource had its first public offering of shares during 2010 on the London AIM market. The offering was funded in British pounds sterling and the cash raised was transferred to the US and converted into US dollars. Between the date of the initial public offering and the conversion to US dollars, exchange rates between the pound and the dollar changed in an unfavorable direction for the company. We believe that this exchange loss was a one-time event and adjusting for this item helps to provide a more comprehensive understanding of the company's performance.

Cautionary Statement:

HaloSource has made forward-looking statements in this press release, including statements about the market for and benefits of its products and services; financial results; product development plans; the potential benefits of business relationships with third parties; and business strategies. 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.

General Information:

The company is incorporated and domiciled in the State of Washington USA. The address of its registered office is 1631 220th Street SE, Suite 100, Bothell, WA 98021 USA.

The company has its primary listing on the AIM market of the London Stock Exchange.

The 2010 unaudited preliminary financial statements were prepared under US GAAP and were approved for issue on 18 February 2011.

The Company's 2010 Audited statements and Annual Report will be available to shareholders on April 15, 2011.