Trading Update

25 January 2016

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 2015 ahead of its preliminary results for the period, which it expects to announce on 8 March 2016.

Revenues for the full year ended 31 December 2015 are expected to be $16.3 million (2014: $21.0 million), with $1.9 million of orders previously expected to be shipped in 2015 now being delivered in Q1 2016. Net cash at the year end is expected to be approximately $4.6 million (2014: $13.8 million).

Drinking Water

Full year revenues were $4.2 million (2014: $6.3 million), impacted by delays in key customer rollouts and the previously announced unscheduled shutdown of the Company's Drinking Water manufacturing facility in China. As announced on 11 December 2015, the Company has successfully resumed full production at this facility and is now actively fulfilling customer orders for key partners such as Perfect, Eureka Forbes and Zhejiang Lonsid Healthy Drinking Water Equipment Co., Ltd. ("Lonsid"), with whom the Company signed a supply agreement in late 2015. Lonsid specialises in the design, development, manufacture and sale of healthy drinking water equipment in the Chinese residential and commercial markets and is now deploying HaloPure® technology in several of its reverse osmosis systems.

Environmental Water

Full year revenues for the business were $2.4 million (2014: $3.0 million), impacted by drier-than-average weather across the western United States throughout 2015, which decreased demand for our products used in storm water management. During the year, HaloSource undertook a restructuring of this division, which is expected to continue to improve gross margins and reduce expenses in the business going forward.

Recreational Water

Full year revenues were $9.7 million (2014: $11.5 million), which comprised $1.3 million in revenue from new customers during the year but was more than offset by reduced sales to two of our larger, lower margin customers. The Company has implemented structural changes and moved to a commission-based agency sales model, which is expected to continue to improve gross margins and reduce fixed costs going forward.

Martin Coles, President and CEO of HaloSource, said:

"We have now fully resolved the specific operational challenges that impacted the business in 2015.

We remain committed to investing in and building our Drinking Water business whilst continuing to aggressively reduce our cost of goods and operating expenses. 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 brands.

We have implemented a number of structural changes during 2015 which we expect to continue to improve gross margins in both the Recreational and Environmental Water businesses while we continue to explore strategic opportunities to strengthen our balance sheet and improve cash reserves."

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About HaloSource

HaloSource, Inc. creates innovative solutions for water purification that serve people, preserve the planet and protect our most valuable resource. The Company works with scientists and industry experts across the globe in search of new ways to improve water quality and has been awarded more than 70 patents for its ground breaking chemistries, which provide effective and environmentally responsible solutions to the growing issue of water stress.

Founded in Seattle, Washington, HaloSource has grown to become an influential leader in three market segments: drinking water, recreational water, and environmental water treatment and remediation. 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.

HaloKlear, HaloPure, and SeaKlear are either trademarks or registered trademarks of HaloSource, Inc. All other trademarks, brand names or product names belong to their respective holders.