Trading Update

FOR IMMEDIATE RELEASE

16 July 2013

HALOSOURCE, INC.

("HaloSource" or "the Company")

TRADING UPDATE

Bothell, WA, U.S.A. - HaloSource, Inc. (HAL.LN, HALO.LN), the clean water technology company trading on London's AIM, announces continued positive momentum building across the core segments of its business during the first half of 2013.

The Company is experiencing a significant positive shift in momentum in line with its strategic plan as negotiated contracts begin to deliver revenue with particular progress in the Water Purification segment.

Revenue from orders shipped for the six months ended 30 June 2013 totaled US$5.9 million (H1 2012: US$5.8 million). The growth in revenues across business segments was approximately 19% and 26% for Environmental Water Remediation and Water Purification respectively, while Recreational Water was down 4% from the same period a year ago.

Total orders received for the six months ended 30 June 2013 totaled US$7.2 million, equating to a backlog of US$1.3 million carried over into the second half of 2013. Aggregating orders shipped and orders received, half-on-half growth for Environmental Water Remediation, Water Purification and Recreational Water was 24%, 117% and 11%, respectively. The Company expects to ship the entire current backlog during July and August 2013.

Martin Coles, CEO, commented "The extent and quality of our backlog represents a significant shift from the same period in 2012 and earlier when this was typically less than US$0.1 million, thus reinforcing the global demand which is building for our innovative suite of water purification technologies."

As of 30 June 2013 the Company had cash and cash equivalents, restricted cash and short-term investments totaling US$19.5 million. The Company remains focused on managing its cash burn, which was approximately US$7.3 million during the first half of 2013 (up from US$5.4 million during the same period in 2012) driven largely by investments in inventory-related working capital due to increasing demand for Water Purification and Environmental Water Remediation products. For the full year 2013, the Company expects to reduce cash burn significantly as revenue and gross margin growth continue to accelerate while balancing SG&A and working capital needs to drive toward the milestone of cash flow break even in the near future.

Mr. Coles commented, "These are very exciting times for our company and we are delighted at the strong growth in confirmed orders we saw in the first half of 2013 which continues to validate the strength of the strategic focus we put in place early in 2012.

The acceleration in our Water Purification business underscores the product leadership of our class leading intellectual property, the depth and commitment of our strategic partners and the translation of deal flow into cash flow which we see continuing to show up in our performance for the balance of the year and beyond.

We are equally excited about the performance of our Environmental Water Remediation and Recreational Water businesses with rapid order growth in both clearly demonstrating the value of consumer and end user led innovation. The strong retail and consumer reception of our new SeaKlear® Mighty Pods™ product line is a clear example of this.

We are confident that continuing to focus on our four strategic pillars of relentless consumer/end user led innovation, deep consumer/end user understanding, building our commercial capacity in local markets and deep strategic partnering with key industry players is key to long term, sustainable growth and profitability."

Outlook

The Company continues to build strong momentum behind its core operating segments as results begin to materialise from the focus of our strategic plan.

We believe the Water Purification business is poised for significant growth as major partners are actively expanding sales activity for new, HaloPure® powered, water purification devices in India, China, South East Asia and major South and Central American Markets.

We expect continuing rapid growth in our Environmental Water Remediation segment as existing and new customers experience the cost and performance benefits of our unique green solutions in an increasingly regulated sector.

We will continue to drive innovative new products in the Recreational Water business building on our recently introduced line of SeaKlear Mighty Pods products. We see increasing demand for these products in particular in the international pool and spa markets as customers and consumers increasingly see the benefit of convenience and the efficacy brought by this easy to deploy form factor.

Whilst the Company remains confident of its long term outlook, the Company believes that revenue expectations for the full year 2013 will be in the range of US$18.0-US$20.0 million, representing growth of approximately 35%-50% over the full year 2012.

This press release contains certain forward-looking statements. All statements contained in this press release that do not relate to matters of historical facts should be considered forward-looking statements. Forward-looking statements include statements with respect to expectations of the future operations, performance and financial condition of the Company, the Company's plans to decrease cash burn, the market for and benefits of its products and services and related intellectual property, the Company's introduction and deployment of new products and expansion of existing product lines, the potential benefits of business relationships with third parties, and the Company's plans, strategies and expectations for future growth and efficiencies. 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. 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

About HaloSource

HaloSource (halosource.com) is a global clean water technology company headquartered in Bothell, Washington, U.S.A. We design solutions to protect people, preserve the planet and celebrate our most valuable resource-water that is safer, cleaner and more accessible for people everywhere.

HaloSource is committed to relentless innovation, industry-leading products and ongoing support for water-related philanthropy. Our proprietary technologies for drinking and recreational water, textile coatings, and environmentally friendly wastewater recycling, enable our partners to rid the world's water of impurities and return it responsibly to the earth.

HaloSource Technologies that Protect Water and Textiles:

• HaloPure® media is the most flexible, price-competitive disinfection solution for clean drinking water in the industry. In 2009, it became the first drinking water technology in 30 years to be registered by the United States Environmental Protection Agency (USEPA), widely recognized as having the world's most stringent performance requirements for water purification. In 2010, HaloPure media was approved by China's Ministry of Health (MOH) and recognized for meeting the world's most stringent water purification requirements, a key differentiator for our multi-national partners. In Brazil, the use of HaloPure media has met or exceeded all appropriate standards of the National Institute of Metrology, Standardization and Industrial Quality (INMETRO).

• SeaKlear® Pool and Spa treatment products bring both natural biopolymers and antimicrobial applications for treating recreational water.

• HaloShield® products consist of antimicrobial coatings solutions that employ unique technology that binds chlorine--‐based bleach to textiles such as sheets, lab coats and towels for use as a non--‐toxic biocide.

HaloSource Technologies that Preserve the Environment:

• HaloKlear® products use natural biopolymers providing industrial water clarification with dramatic reductions in ecological impact.

HaloSource Celebrates Clean Water:

HaloSource supports organizations dedicated to sustainable clean water projects. Currently, the company is working to provide clean water to a village in the Mdolo region of Malawi with their partner A Barefoot Mile Foundation, and the company recently became a platinum sponsor of Wishing Well International Foundation.

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