Trading Update

FOR IMMEDIATE RELEASE 

29 July 2014

HaloSource, Inc.

("HaloSource" or the "Company")

TRADING UPDATE

HaloSource, Inc. (HAL.LN, HALO.LN), the global clean water technology solutions company traded on London's AIM, today announces its trading update for the six-month period ended 30 June 2014.

Total revenues for the period increased 24% to $7.3 million (H1 2013: $5.9 million) due to revenue growth across each segment of the business. The Company's Drinking Water business, a key component for future growth, delivered a particularly strong performance, more than doubling revenue.

The Company significantly reduced its cash burn by 35% compared to the first half of 2013, and ended the period with $ 8.3 million in cash. Management remains confident that revenue and net earnings for the full year will be in line with market expectations.

Drinking Water

Drinking Water revenue for the period increased 124% to $2.0 million (H1 2013: $0.89 million), driven by growth with key strategic partners in China and India. Perfect, China's largest direct-seller of household products, has taken delivery of 370,000 cartridges over the past 12 months. Perfect's pressure fed water purification device deploys HaloSource's class leading HaloPure® disinfection technology and is seeing increasing demand in the Chinese market with business accelerating both in device deployment and in cartridge replacement.

As announced in January 2014, HaloSource extended its standstill agreement for the gravity fed retail and e-commerce channel segments in China with one of the world's largest multinational consumer goods corporations (MNC) with a second one-time payment of $500,000 (HaloSource received a similar payment in 2012). The Company is currently shipping assembled cartridges to this partner in support of their transition from market test to full market launch. The Company believes this partner could be a significant contributor to HaloSource's drinking water business in the coming years.

o H2O International, Inc. received its first shipments of HaloPure Powered® Pitchers for Latin America where their MNC partner will focus initially on 5 countries. The Company expects this distribution relationship to build both in scale and geographic reach and will continue to be a key contributor to its business.

o The Company continues to grow its business with key strategic partners in other channels and markets led by a long-term relationship with Eureka Forbes, and Tupperware®, in the retail, e-commerce and direct sales channels within the gravity fed segment in India.

o Work is progressing with several other segment leaders in Asia Pacific to incorporate HaloPure's cartridge containing bromine based contact kill system which the Company expects will lead to further new product introductions during 2015.

Environmental Water

Environmental Water revenue grew 29% to $1.22 million (H1 2013: $0.95 million) as the Company focused its efforts on partnering with established solution providers in North America in two key segments: mining and construction sediment removal.

o The Company signed a partnership with Rain for Rent, one of North America's largest water service providers to the construction sediment removal market during the period. Joint marketing and selling programs have begun in their network of 60 locations.

o Careful expansion of the Company's unique biopolymer based aggregation chemistry to cover a broader base of business has allowed Environmental Water customers to deploy cleaner, more effective and cost efficient solutions within their treatment systems - key considerations in the burgeoning North American market.

Recreational Water

Recreational Water revenue grew 1% to $4.01 million (H1 2013: $3.96 million) in a challenging period for the North American Specialty Chemicals market that shrank in the first half of the year, driven by a difficult start to the 2014 season as a result of adverse weather impacting much of the pool and spa industry.

o During the period, the Company reached a milestone in its history as well as in the pool and spa industry by shipping its millionth POD. This proprietary new form factor delivers conventional water care liquids in a premeasured and pre-dosed dry concentrate self-dissolving sachet or POD.

o The Company's new POD pool and spa products enable it to continue expanding its distribution through its OEM strategy of supplying the chemistry and consumer relevant form factors to significant industry players serving both "mass" and "big box" retail.

The Company remains committed to accelerating the commercialisation of its unique, proprietary water purification technologies by continuing to focus efforts on its mission as the Innovation Driver in the Chemistry of Water Purification while leveraging the go-to-market capacity of MNC through strategic partnerships. This focus will help leverage the MNC channel presence, geographic reach, and brand promise to help take HaloSource's class leading clean water technology solutions to market.

Martin Coles, CEO of HaloSource, commented:

"We are delighted to see clear confirmation that our strategic focus is delivering results. We are continuing to deliver innovation through deeper relationships with key industry players as a major factor for growth. We view 2014 as a year where Drinking Water and Environmental Water contribute in a rapidly increasing way to our overall financial performance. We remain focused on achieving cash flow breakeven and profit through revenue growth, margin expansion and tight control of spending."

ENDS

About HaloSource

HaloSource, Inc. designs solutions that serve people, preserve the planet, and protect our most valuable resource - water. The company works with scientists and industry experts in search of new ways to improve water quality around the globe. The team of HaloSource chemists, biochemists and microbiologists hold more than 100 patents, giving the company the power to provide environmentally conscious solutions. The company's mission is to make water better and help return previously contaminated water into the environment in the most clean, natural pure state.

Founded in Seattle, Washington, HaloSource has grown to become an influential leader inthree key sectors: drinking water, recreational water, and environmental water treatment and remediation. HaloPure®, HaloKlear® and SeaKlear® are the distinct brands that optimize the unique chemistry platforms across these primary sectors. Learn more about these cutting edge technologies by visiting HaloSource.com

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